5 Investment Options You Can Consider In Your 20s
Savings Bonds are one of the safest investment options today. These bonds are backed by the Government of India and provide an excellent rate of return for those who are looking to invest their funds. But, how do savings bonds work? This article will help you figure that out.
How it works for the Government:
The Government needs funds for the various development activities that it carries out in the country. To meet these needs, it needs to raise funds. A bulk of the funds are raised through tax revenues, both direct and indirect taxes. Another major component of its revenue is through small savings schemes. These small savings schemes include Post Office deposits, National Savings Certificate, Kisan Vikas Patras, Public Provident Fund, etc. The Government uses these funds for its functioning and in return, pays the investors of these accounts a higher rate of interest. These investments are guaranteed by the Government of India, which means it is obligated to make these initial investments available to the depositors on maturity. That is what makes these investments safe. They have a sovereign guarantee of the Government.
One of these investment options that the Government makes available for small investors are Savings Bonds. Investment Bonds work just like the other small savings accounts, except that these are bonds. These bonds allow small investors to participate in the bond market. The Government makes these bonds available for the investors and pays them 7.75% interest per annum on the amount invested.
How it works for the investor:
Investors can invest a minimum of Rs. 1,000 in the savings bonds. This investment can be increased in multiples of Rs. 1000. The investor can apply both online or offline to invest in these bonds.
Once the investment is processed, the bond will be credited to the Bond Ledger Account of the investor. It will be in Demat form. The investor will get a Certificate of Holding that will certify the investment he has made in the bond.
Interest on the Savings Bond is payable half yearly at the rate of 7.75%. This interest is taxable at normal rates. For investors looking for capital appreciation, the interest can be reinvested and accumulated till maturity. For investors choosing the cumulative option, a Rs. 1000 investment is redeemed at Rs. 1,703.
The interest on these bonds is fully taxable. It will be taxed at normal interest rates just like fixed deposit interest. The interest will directly be credited to the bank account of the investor.
So, now that you know how Savings Bonds work, you can invest in them and earn an assured income!
Looking to invest in a Savings Bond? Approach your nearest HDFC Bank Branch to know more!
* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.