Floating Rate Savings Bonds, 2020 (Taxable) Information

We are considering Floating Rate Savings Bonds, 2020 (Taxable) issued by Govt of India as a means of fixed income generation for senior citizens or retirees. Have a look at below features of the scheme.

Floating Rate Savings Bonds, 2020 (Taxable)

The government of India has announced to launch the Floating Rate Savings Bonds, 2020 (Taxable) scheme commencing from July 01, 2020, to enable Resident Indians/HUF to invest in a taxable bond, without any monetary ceiling.

The bonds are so-called as they carry a floating interest rate options. The rates will be linked with the prevailing National Saving Certificate (NSC) rate with a spread of (+) 35 bps over the respective NSC rate.

The broad features of the scheme are given below:

Eligibility

Individuals (including Joint Holdings) and
Hindu Undivided Families.
NRIs are not eligible.

Interest Rate (Floating)

(i) Option – The interest will be payable at half-yearly intervals on Jan 1st and July 1st every year.
(ii) Rate – The coupon/interest would be reset half-yearly starting with Jan 1st, 2021 and thereafter every July 1st and Jan 1st. The coupon rate for the first coupon period, payable on January 1, 2021 is fixed at 7.15%.
(iii) Base Rate – The coupon rate will be linked/pegged with the prevailing National Saving Certificate (NSC) rate with a spread of (+) 35 bps over the respective NSC rate.

Repayment/Tenor Repayable on the expiration of 7 (Seven) years from the date of issue.

Premature redemption shall be allowed for specified categories of senior citizens.
Tax treatment Interest on the Bonds will be taxable under the Income-tax Act, 1961
Tradability /Advances Not be tradable in the secondary market and shall not be eligible as collateral for loans.

Transferability

Not be transferable except transfer to a nominee(s)/legal heir in case of death of the holder of the bonds.

Nomination

• A sole holder or a sole surviving holder of a Bond, being an individual, can make a nomination.
• Form of the Bonds
• Issued only in the electronic form and held at the credit of the holder in an account called Bond Ledger Account (BLA), opened with the Receiving Office.

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