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RBI Floating Rate Savings Bonds 2020

Make convenient investments with low-risk returns

RBI Floating Rate Savings Bonds

The RBI Floating Rate Savings Bonds 2020 (Taxable) offer a straightforward investment opportunity with low-risk returns for customers. Key highlights of these Savings Bonds are their attractive interest rates and an extended maturity period. Investors can start with a minimum amount of ₹ 1,000 and increase their investment in multiples of ₹ 1,000, with no maximum cap on the investment amount. It's important to note that the interest accrued on these Bonds is subject to taxation.

Advantages of investing in RBI Floating Rate Savings Bonds 2020

RBI Floating Rate Savings Bonds 2020 are fixed-income instruments issued by the Government of India. They offer pre-determined interest rates that are reset periodically. These bonds offer a secure and safe investment option, suitable for risk-averse investors. The Bonds shall be repayable on the expiration of 7 years from the date of issue, making it a suitable long-term investment option. Some benefits of investing in Savings Bonds are as follows:

  • Online and offline application:
    You can apply either online or offline. In the online procedure, you can apply for FRSBs on your bank’s official website, while for an offline application, you can visit your bank branch. Keep in mind that in case of online application, neither joint account nor minor applicant is permitted.
  • Choice of income or capital appreciation:
    While investing in RBI FRSB, you can choose to receive interest and principal on maturity through the cumulative option or opt for receiving interest income. In the latter, the interest is paid out every six months, while the cumulative option offers a maturity value.
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Eligibility criteria for RBI FRSB

You can invest in RBI FRSBs if you meet the following criteria:

  • An individual who is a resident of India
  • An individual jointly with another individual
  • A parent/guardian on behalf of a minor
  • A Hindu Undivided Family (HUF)
  • Charitable institutions
  • Universities

However, a Non-Resident Indian (NRI) cannot invest in RBI FRSBs in India.

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RBI FRSB interest rates

The interest on the bonds is payable half-yearly on 1st January and 1st July every year. The interest payable on January 1 and July 1 will be linked to the then prevailing rate of interest on National Saving Certificate (NSC). FRS will pay 35 basis points more than the rate offered on NSC.

As of now the interest rate payable on NSC stands at 7.7 percent and the FRSB holders will be paid at the rate of 8.05 percent on January 1, 2024.

Taxation of RBI FRSBs

The interest on the RBI FRSBs is considered under taxable income and, therefore, will attract taxes under the Income Tax Act of 1961 as per the income tax slab under which the investor falls.

These bonds also qualify for Tax Deducted at Source (TDS) when the interest is paid out. In the case of other exemptions, the investor will have to declare the same in the application form.

RBI FRSBs are exempt from wealth tax under the Wealth Tax, 1957. However, there is no deduction on the principal investment.

How to invest in FRSBs?

You can invest in RBI FRSBs by approaching your bank branch and submitting an application along with your Know Your Customer (KYC) documents.

If you want to apply for FRSBs online, Click Here

Frequently Asked Questions

There are many reasons to invest in RBI FRSBs. For one, you can benefit from a high interest rate – the interest on such bonds is payable on January 01 and July 01 each year and the payable interest is linked to the current National Savings Certificates (NSC) interest rates. FRSBs pay 35 basis points more than the NSC rates. Since the bonds have a maturity period of 7 years, you can invest in it for a long-term period.
Investors seeking a low to moderate risk investment can invest in RBI FRSBs. It is also suitable for those investors seeking a regular source of income after retirement, due to the secured nature of the investment, option to receive regular interest payouts, and option for pre-mature withdrawal, subject to conditions.
RBI FRSBs have a lock-in period of 7 years, after which they mature. For senior citizens, the lock-in period is lower. It is 6 years for investors between 60-70 years of age, 5 years for those in the age group of 70-80 years and 4 years for investors above 80 years of age. In case the investor is a senior citizen and wants to make an early withdrawal, a penalty will be charged.
The interest earned on RBI FRSBs is taxable. When the interest is paid out, it is considered taxable income and will be taxed as per your applicable income tax slab. And as per the rules for interest income, Tax Deducted at Source (TDS) is also applicable.
The interest on RBI FRSBs is payable on a semi-annual basis from the date of issue of bonds, till June 30 or December 31. After that, the interest for the period ending between June 30 and December 31 will be payable on a semi-annual basis on July 01 and January 01, respectively.
Your KYC (Know Your Customer) is essential while making savings bond investments. These will include a proof of address and a proof of identity, as specified by the bank. Apart from these, you will need the following documents to invest in savings bonds:
  • The duly filled application form
  • A cancelled blank cheque
  • The investment contribution/amount
RBI FRSBs are non-tradable and non-transferable. Therefore, you cannot use these bonds for availing of a loan from non-banking companies, banks or any other financial institution.
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