The Reserve Bank of India (RBI) has expanded the basket of products offered through its Retail Direct Portal by allowing individual investors to subscribe to Floating Rate Savings Bonds (FRBs), 2020 (Taxable).
- Earlier, retail investors were allowed to invest in central government securities, treasury bills, state government securities, and sovereign gold bonds through the Retail Direct portal.
About Floating-rate bonds
- Floating-rate bonds are interest-bearing and non-tradable, are issued by the government and reach maturity seven years from the date of issuance.
- They are different from traditional bonds as their variable coupon rate is reset at predetermined intervals. It means, the interest rate on these bonds fluctuates throughout their tenure.
- The interest rate on RBI savings bonds carries a 0.35% premium over the National Savings Certificate (NSC) interest rate. Any adjustments in the NSC interest rate are mirrored in the interest rate offered on RBI savings bonds.
- Interest earnings from RBI FRSBs are classified as taxable income and are subject to taxes in accordance with the Income Tax Act of 1961, based on the applicable income tax slab for the investor.
- These bonds are eligible for Tax Deducted at Source (TDS) when interest payments are made. If investors are eligible for any exemptions, they must declare them in the application form.
