Floating Rate Savings Bonds, 2020
Government of India has notified the issue of Floating Rate Savings Bonds,2020 (Taxable) vide a F. No. 4(10)-B(W&M)/2020.
These bonds are known with the short name FRSB, 2020(T), and launched on 1st July 2020.
FRSB, 2020(T) are debt instruments issued by the GOI whose interest rate fluctuates every six months.
It was launched FRSB, 2020(T) after the withdrawal of Taxable Bonds which was offering a fixed interest rate @ 7.75%.
Conditions of Investment
The Bonds may be held by: –
(i) a person resident in India,-
(a) in his individual capacity, or
(b) in individual capacity on a joint basis, or
(c) in individual capacity on anyone or survivor basis, or
(d) on behalf of a minor as father/mother/legal guardian
(ii) Hindu Undivided Family.
Note: A Non-resident Indian (NRI) is not eligible to apply for such bonds. If a person who subsequently becomes NRI, then he shall hold the bonds, and repatriability of interest and maturity proceeds shall be as per FEMA.
- The amount of investment shall be in multiples of Rs. 1,000/-.
- The minimum investment amount shall be Rs. 1,000/-.
- There is no upper limit of investment.
Lock-in Period/ Maturity Period
Maturity Period is 7 years from the date of issuance. Premature encashment allowed for age group of 60 years and above.
Interest and it’s the taxability
- 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.
- The coupon/interest of the bond would be payable and 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%.
- There is no option to receive interest on a cumulative basis.
The interest received will be taxable as per the provisions of the Income Tax Act, 1961 i.e. according to the slabs applicable to an individual.
Tax Deducted At Source (TDS)
- TDS will be deducted from time to time while making payment in the credit of the account.
- No deduction of TDS shall be made while making payment of interest for individuals who have made a declaration for Non- Deduction of TDS.
Application, Nomination, and Transferability
How to Apply?
Application for the bonds may be made either physical or electronic form in Form ‘B’, mentioning the name, amount, and full address.
The subscription shall be made in cash (up to Rs. 20,000/-)/drafts/cheques or any mode acceptable to Receiving Office. (Refer next page for names of receiving offices).
The Bonds shall not be transferable, except transfer to a nominee(s)/legal heir in case of death of the holder of the bonds.
- A sole holder or joint holders may nominate in Form ‘C’ one or more persons who in the event of the death of the holder of bonds shall be entitled to the bonds and payment thereon.
- The investor can make a separate nomination for each investment.
- No nomination can be made in respect of Bonds issued in name of Minor.
- A nomination made by the investor can be cancelled in Form ‘D’ and a new nomination can be filed and registered with the Receiving Office.
Name of Receiving Offices
The following banks are authorized by the Government of India to deal with the above FRSB,2020(T) bonds.
- State Bank of India
- Bank of Baroda (Including Vijaya Bank and Dena Bank)
- Bank of India
- Bank of Maharashtra
- Canara Bank (Including Syndicate Bank)
- Central Bank of India
- Indian Bank (Including Allahabad Bank)
- Indian Overseas Bank
- Punjab National Bank (Including Oriental Bank of Commerce and United Bank of India)
- Punjab & Sind Bank
- Union Bank of India (Including Andhra Bank and Corporation Bank)
- UCO Bank
- HDFC Bank Ltd.
- ICICI Bank Ltd.
- IDBI Bank Ltd.
- Axis Bank Ltd.
Looking at the current market scenario and the downward trend of the economy, it is very obvious that one should take an informed call while investing money anywhere. These bonds have zero credit risk but at the same time your money gets locked in for a period of 7 years, there is no fixed rate of return & interest income will also be taxable.
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