7.75% RBI Bonds
It is launched by RBI in 2003. The 7.75% RBI Bonds offers 7.75 percent taxable rate of interest over a tenure of seven years from the date of issue. There is minimum investment limit of Rs. 1000 and there is no maximum limit on investment in these bonds. Any resident individual & HUF can invest in these bonds (except NRI). Investing in these bonds is an attractive proposition for individuals who has the point of view of lock in interest payments likewise wants to ensures safety of principal. At the times when interest rates are declining, it is suitable time to consider this option as they are of highest safety and also provides higher interest to investors.
There are following features of the bonds stated as:
- There is half yearly interest payment option is available to the investors. Moreover, there is availability of cumulative option, wherein the interest payments will be paid on the maturity date along with principal repayment.
- The bonds have fixed tenure of 7 years.
- The interest payment is taxable as per investor’s income tax slab rate. Along with this, there is no exception available in income tax.
- The Bonds are not transferable. They are not even tradeable in the secondary market.
- Premature encashment option shall be allowed to individuals who are 60 years and above. (condition of minimum lock-in period.)
Hence, it is an attractive alternative to consider as against bank FDs. The retails investors can avail advantage of security and guaranteed returns. However, if one wants to enhance returns or wants to build their wealth then it is not an attractive tool to their utilization.