Get safe with 8 per-cent Savings Bonds by Shweta Misra

The Government of India 8 per cent Savings Bonds, 2003 (taxable) scheme is another instrument suitable for investors seeking returns that are fixed and assured. GOI Savings Bonds may not be terrific investment option if you are looking for capital appreciation or a substantial margin over inflation.

An 8 per cent return offers neither. Further, investments in RBI’s 8% Savings Bonds do not qualify for Income Tax Deductions and interest earned is fully taxable. But there is no better deal when it comes to safety. No need to fret over credit ratings.

If you are a retiree and wish to invest for more regular income after investing in Senior Citizen Savings Scheme and Post Office Monthly Income Scheme combination, you may opt for half-yearly option of RBI 8% Savings Bond scheme with no upper investment limit.

Who can invest in 8% Savings Bonds (Taxable), 2003?

1. An individual;
   1. Who is not a Non-resident Indian
   2. In his or her individual capacity or
   3. On joint basis, or
   4. Anyone or survivor basis, or
   5. On behalf of a minor as father/mother/legal guardian.
2. A Hindu Undivided Family
3. An Institution
   1. ‘Charitable Insititution’ under section 25 of the Indian Companies Act 1956.
   2. Institution obtained Certificate Of Registration as charitable institution .
   3. Any Institution which obtained certificate from Income Tax Authority
      U/S 80G of Income Tax Act ,1961.
4. “UNIVERSITY” established or incorporated by Central, State or Provincial Act, U/S 3 of University Grants Commission Act, 1956 (3 of 1956) .

Mode of Holding for 8% Savings Bonds (Taxable)

Bonds are issued in the form of Bond Ledger Account in denominations of Rs. 1000/- These bonds are not transferable. A nomination facility is available..

Liquidity of 8% Savings Bonds (Taxable)

These bonds can not be traded in secondary market. The good thing is that investors can get a loan against these bonds, from select banks.

Salient Features of 8% Savings Bonds (Taxable)

• Minimum Contribution : Rs.1,000 (Investment in multiples of 1000); no maximum limit on investment
• Maturity Period : The tenure of the bond is 6 years from the date of issue. No interest would accrue after the maturity of the bond.
• Options Available : 1) Half Yearly Interest Payable, 2) Cumulative
• Rate of Interest : Bonds will bear interest @ 8.00% p.a. and are payable half-yearly. The interest payment dates are February 1 and August 1 for non-cumulative investments. For investors who have chosen the cumulative option, the value of the investments at the end of 6 years would be Rs. 1601/- (being Principal and Interest) for every Rs. 1000/- invested. Interest on the Bonds is taxable under Income Tax Act 1961.
• Compounding Frequency : Half Yearly Compounding for Cumulative
• Premature Withdrawal : Not allowed
• Nomination Facility : Nomination facility is available for Individual investment for sole holder or surviving holder basis. This facility is not be available for joint holdings and minor investment.
• Tax Exemptions : No income tax exemption available, however, the bonds will be exempt from Wealth-Tax under the Wealth-Tax Act, 1957.
• Tax on Interest : Fully Taxable

Source : http://www.personalmoney.in