7.75% is the new 8%; govt to issue new bonds at lower rateThe government has now clarified that the GoI 8% Taxable Bonds (also called the 8% RBI Bonds) will be replaced by new bonds rather than being scrapped altogether. A new tranche of bonds paying out an interest of 7.75% will be made available to the public.

About the bonds

  • The GoI Taxable bonds have a maturity of 6 years.
  • As the name suggests the interest on them is taxable. It will be added to your income and taxed as per your slab.
  • The interest is payable half-yearly. However, you can also choose the cumulative option in which case the interest is paid to you when the bond matures.
  • The minimum investment amount in them is Rs 1,000 and there is no maximum limit. However, investments have to be made in multiples of Rs 1000.
  • The bonds are not available to Non-Resident Indians.
  • They cannot be traded on an exchange and you cannot borrow money against them from banks.
  • These bonds can be bought at par. This means that you don’t have to pay more than Rs 100 for a bond with a face value of Rs 100. You can buy them from bank branches.

The lower interest rate on the 8% bonds is in sync with the rate cuts on other small savings schemes that we outline here.

Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.