New Delhi: Today is your last chance to buy 7.75% yielding taxable government bonds as the government has decided to stop selling these bonds from tomorrow.
“The Government of India, hereby notifies that the 7.75% Savings (Taxable) Bonds, 2018, shall cease for subscription with effect from the close of banking business on Thursday,” RBI said in a notification without saying why it is stopping the instrument.
Worth mentioning here is that demand for these government bonds has gone up in recent days as interest rate in the economy is continues to fall. These bonds come with a fixed tenor of seven years and offer sovereign guarantee when many fixed income mutual funds started blowing up. These bonds are non-tradeable and had regular interest payments and cumulative options.
Post-tax return for investors in the highest tax bracket will be 4.40%. One can buy these bonds from banks, including State Bank of India (SBI), ICICI Bank and HDFC Bank and investment portals such as HDFC Securities and ICICI Securities.
Worth mentioning here is that the government has already slashed interest rates on small savings schemes like National Savings Certificates, Public Provident Fund and Sukanya Samriddhi Account.
“Many investors have shied away from the equity markets,” Vikram Dalal, MD of Synergee Capital Services told Economic Times. “With investable money, they are seeking 7.75% RBI Saving (Taxable) Bonds. Since the instrument is a fixed deposit, is not tradable in the secondary market. But the instrument could be a steady longterm source of interest income,” he added.
There are no investment limits on RBI savings bonds. Any Indian citizens and Hindu Undivided Families (HUFs) can buy the securities that come with a lock-in period during which investors cannot redeem.
However, for senior citizens, there is some relaxation on lock-in. They can redeem these bonds in four, five and six years. These bonds cannot be pledged to avail any loan.
Interest payable is either half-yearly or cumulatively. If an investor needs liquidity, the half-yearly option works well. Bonds are issued in dematerialised form to investors. The latest series of government bonds was introduced in January, 2018.