RBI
Floating Rate Bond
Floating Rate Savings Bonds 2020 are debt instruments issued by the government whose rate of return fluctuates from time to time. The interest rates for these bonds change as per its benchmark rate.
Features of Floating Rate Savings Bonds
1. Interest rates for Floating Rate Savings Bonds 2020 will change every six months
For the newly launched Floating Rate Savings Bonds 2020, the interest amount is payable every six months and after which the interest rate would be reset. At present the interest rate is 7.15%. This interest rate change every 6 months.
2. The interest rate for these bonds would be 35 basis point over and above NSC rates
3. Only Indians residents can buy these bonds
Any resident Indian can invest in this bond. NRIs are not eligible for making investments in Floating Rate Savings Bonds 2020.
4. These bonds can be bought in dematerialized format
The bond will be held in dematerialized format in Bond Ledger Accounts, which are solely opened with a bank for keeping government securities. However, the investor will be issued a certificate for the same.
The bond can be bought in cash (up to Rs 20,000), demand draft, cheque, or through online payments. While there is no maximum limit for investment, the minimum requirement is only Rs 1,000.
5. The lock-in period for these bonds is seven year, with exceptions for senior citizens
The tenure for these bonds is seven years. And early redemption is allowed only for senior citizens in specific cases. That is, investors between the age of 60 and 70 can encase the bond prematurely after completion of six years. Meanwhile, investors in the age bracket of 70 to 80 can do the same after completing five years, and it is four years for investors above 80.
6. Floating Rate Saving Bonds 2020 are taxable
Return from your investments in Floating Rate Savings Bonds 2020 will be added to your income and taxed as per your tax slab.
7. These bonds are not tradable, but transferable to the nominee
The bondholder/holders can make a nomination for the bond. The bond will be automatically transferred to the nominee/nominees upon his/her/their death. Meanwhile, it cannot be traded in the market or used as collateral for a loan.