Govt. Notifies 7.75 % bond schemes for retail investors

 

Government Notifies 7.75 % bond schemes for retail investors

The central government has notified taxable bond scheme equivalent to 7.75 percent in value to retail investors. The major step has been taken by the government with an aim to replace the already existing 8 percent value. The government has also announced that it shall open the bonds for subscription to the investors provided with certain maturity time period.

Launch details

  • According to reports collected by sources, the government will make the bonds available for investors starting from 10th January 2018. The sources have stated that the bonds will be available for a time period of 7 years till they get matured for encashment.
  • The official notification for implementation and launch were coordinated by the officials from the Finance Ministry.

Eligibility criteria

  • According to the statements made by sources, the bonds can be purchased by any one only on individual basis. Apart from this the officials have already disclosed that Non Residential Indians may not be eligible to invest in the bonds.

Restrictions imposed

  • There were also certain restrictions that were imposed on the usage of the bonds in general. One of the most important restrictions that investors need to keep in mind is that the bonds cannot be treated as trading assets.
  • Investors will not be able to make use of the bonds for secondary market trading. It is also mentioned that investors may not be able to make use of the bonds to keep as collateral at the time of requesting for loan amount.
  • This is restricted to all banking institutions along with all other private financial institutions and companies or organizations.

Key Features

  • One of the main features that you need to remember is that the new bond will offer investors with less savings percentage that is equal to 7.75 percent.
  • The new changes have been implemented with an aim so the gap that arises on account of cheques realizations can in fact be avoided. The government will also offer investors with half yearly interest rates.
  • Apart from this the government has also stated that the interest would be payable as per the cumulative value only at the end of the maturity period of seven years that will be equal to Rs 1703 for Rs 1000 Bond value.
  • As per further notifications from the finance ministry, it has been clarified that the bonds purchased by the investors will not be eligible for taxation as per the Wealth Tax 1957 act.

Conclusions

One of the benefits for investors here is that they get to make tax free investment in Bonds. The draw back may still be that you will be paid a reduced interest rate as compared to earlier value, but this change has been made by the Ministry on account of reducing rate of interest offered by financial institutions.

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