Things to know before Investing in Savings Bond

Fixed income instruments have their own charm and allure. These instruments provide a fixed income in spite of the fluctuations in the market. This make them very popular instruments for people looking for some fixed income, especially senior citizens. To promote investment by individuals and families, the Government of India introduced 8% taxable bonds in the year 2003. In 2018, the old scheme was closed, and the Government introduced a 7.75% Savings Bond open for subscription.

The Savings Bond is a popular debt instrument because it is guaranteed by the Government of India. This gives it an added layer of security and assures the investor of both interest payment and principal redemption. This gives the Savings Bond safety.

If you are looking to invest in Savings Bond, then this guide is for you.

Here’s what you need to know before investing in a Savings Bond:

  • The minimum investment amount is Rs. 1,000. It can be increased in multiples of Rs. 1000. There is no maximum limit.
  • The maturity of the Savings Bond is 7 years. However, for senior citizens between the age 60 and 70 years, the bond will mature in 6 years. For senior citizens between 70 to 80 years, the bond matures in 5 years. For senior citizens over 80 years, the bond matures in 4 years.
  • The interest on the Savings Bond is paid out at 7.75%. There are two options for interest payment: cumulative, and non-cumulative. For those looking for a regular source of income, the non-cumulative option pays out interest every six months. The cumulative option reinvests interest and pays it out at the end of the bond. The people opting for cumulative option will get Rs. 1,703 for every Rs. 1,000 that they invest.
  • Any resident individual and a Hindu Undivided Family (HUF) is allowed to invest in the bond.
  • The interest on this bond is taxable. It is taxed the same way as fixed deposit interest.
  • These bonds cannot be transferred from one person to another person.
  • The 7.75% Savings Bond will be transferred to the Demat Account of the investor. The investor will have to approach a bank to invest in the Savings Bond and provide details such as PAN card, Demat Account details etc.
  • The Savings Bond cannot be traded in the secondary market. It is not available as collateral for loans because of its transferability.

So, now that you know about the 7.75% Government of India Savings Bond, you can take an informed investment decision.

                Here’s all you need to know more about Savings Bond!

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. You are recommended to obtain specific professional advice from before you take any/refrain from any action.