The Government has announced the launch of seven-year Floating Rate Savings Bonds, 2020 (Taxable) scheme commencing from July 1. The coupon on January 1, 2021 will be paid at 7.15 per cent.

This move comes a month after the Government pulled the plug on 7.75 per cent Savings (Taxable) Bonds, 2018 with effect from the close of banking business on Thursday, May 28, 2020.

As per a Reserve Bank of India (RBI) notification, Floating Rate Savings Bonds (FRSBs) will enable person resident in India/Hindu Undivided Family (HUF) to invest in a taxable bond, without any monetary ceiling.

FRSBs will be on tap till further notice and issued in non-cumulative form only.

“The interest on the bonds is payable semi-annually on 1st Jan and 1st July every year. The coupon on 1st January 2021 shall be paid at 7.15%.

“The interest rate for next half-year will be reset every six months, the first reset being on January 01, 2021. There is no option to pay interest on a cumulative basis,” the RBI said.

The Bonds will be repayable on the expiration of seven years from the date of issue. Premature redemption will be allowed for specified categories of senior citizens.

Interest on the Bonds will be taxable under the Income-tax Act, 1961 as amended from time to time and as applicable according to the relevant tax status of the bondholder.

Published on June 27, 2020

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