RBI Bonds for Senior Citizens | Is it Safe and Secure option? (2024)

Reserve Bank of India offers bonds for senior citizens as a way to provide them with a regular income. RBI Bonds For Senior Citizens are safe and secure and offer a fixed rate of interest. If you’re a senior citizen looking for a way to supplement your income or make ends meet with limited corpus, these bonds may be the right option for you. Learn more about these saving bonds and how they can benefit you.

An Overview: RBI bonds for senior citizens

RBI bonds were launched as floating-rate taxable bonds with a tenure of 7 years.

The rate of interest of these bonds reset every six months and is + 0.35 % over the returns on National Savings Certificate (NSC). [RBI Press Release: 2021-2022/1465]

National Savings Certificate is now offering 7%. Consequently, the coupon rate on these bonds is 7.35 percent (7.00 plus 0.35). These bonds have a minimum investment requirement of Rs. 1000 and multiples thereof.

For elderly individuals in age group of 60 to 70 years old, RBI bonds lock in period is 6 years. However, the lock-in term is 4 years for those over 80 and five years for those in the 70 to 80 age bracket. After the lock-in period, they have the option to sell their investment.

The Sole holder or holders on a joint basis (Joint Holders) can propose one or many people as nominees in consonance with the provisions of the Securities Act, 2006 (38 of 2006) and the Government Securities Regulation, 2007, both of which were published in Part III, Section 4 on December 1, 2007, in the Gazette of India.

The Salient Features of RBI Bonds For Senior Citizens:

The following are the major features of RBI Savings Bonds:

• Investors can purchase bonds either in their own names or on behalf of their children.
• Senior citizen investors might choose to invest together or on their own.
• Hindu undivided families are also eligible to invest.
• Non Resident Indian investors cannot enroll in the RBI Bond Program.
• The application for RBI bonds is available in electronic form.
• Once the related penalty fee has been paid, the 7-year lock-in period may be canceled whenever desired.
• As little as Rs. 1000 can be used to acquire an RBI bond.
• Bonds may be kept physically or electronically.
• These bonds are not allowed to be used as loan collateral.
• Interest rate varies from 7.15% to 7.35%.
• These bonds are exempt from Wealth Tax under the Wealth Tax Act of 1957.
• The ownership of the Bond shall not be transferable. However, it has a nomination facility; the Bond is instantly transferred to the nominee in the event that the original bondholder passes away.
• Bondholders need to give the issuer, the Reserve Bank of India, information about their specific bank account after receiving the money due at maturity.

These bonds can be purchased from designated branches of scheduled commercial banks, designated Indian post offices, and online through the Reserve Bank of India‘s website.

It’s important to note that these bonds are taxable, and the interest payments on them are added to the investor’s income and taxed accordingly!

Also, these bonds are not tradable in the secondary market, and the holder can only sell them after maturity. Therefore, these bonds suit senior citizens looking for a stable, fixed-income investment option with moderate risk and those who want to save on taxes.

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RBI Bonds for Senior Citizens 2024: Should You Invest?

You should consider the following factors before you decide to invest in these bonds:

Investment Horizon:

These bonds have a maturity period of Seven years, so it’s important to ensure that the investor has enough time to hold the bonds until maturity.

Risk Tolerance:

RBI Bonds are considered a relatively low-risk investment option. The interest rate is fixed, and the bonds are issued by the RBI, considered a safe institution. This makes them a suitable option for senior citizens who are risk-averse and looking for a stable, fixed-income investment.

Taxation:

The interest income from these bonds is taxed at the applicable marginal tax rate. TDS on interest income will be deducted. So they come with some tax liability.

Interest Rates:

The interest rate on these bonds is revised every six months, on January 1 and July 1 of each year, that offers a fixed interest rate of 7.35% per annum (paid semi-annually). This can be attractive for a senior citizen looking for higher interest payments than traditional savings accounts.

Liquidity:

These bonds are not tradable in the secondary market, and the sole holder can’t sell them before maturity, so it’s important to consider the liquidity needs before investing.

Still In Dilemma?

In light of the factors we just outlined, you might be wondering why you should purchase RBI Bonds. So, finding a solution is simple. These relationships are not only secure and safe but also quite fulfilling.

These bonds hold up well compared to other investment options like tax-free or Fixed Deposit (FD) accounts since they have a greater yield, safer source, and shorter lock-in period than Fixed Deposits.

So, How To Invest In RBI Bonds For Senior Citizens?

Deposits of money up to Rs 20,000 can be made at the Receiving Office using drafts, cheques, or other electronic means. Banks, such as State Bank of India or private sector banks, such as, IDBI Bank, Axis Bank, HDFC Bank, and ICICI Bank, would approve bonds at the approved branches in the form of a Bond Ledger Account. These bonds will only be granted digital access and kept in the Bond Ledger Account at the Receiving Office to the owner’s credit.

Conclusion

It is quite easy to acquire RBI Bonds since the minimum investment requirement is as low as 1000, and the procedure is straightforward. It offers flexibility to address liquidity problems in addition to a selection of cumulative and noncumulative investing modes. It offers attractive returns or half yearly returns- if not better than the average fixed deposit rate currently available in the market.

Frequently Asked Questions on RBI Bonds

How is the interest on the Bond calculated?

Bonds start accruing interest from the first day you buy them. Every six months, the interest accrued gets added to the principal value. So you get a new value of the bond twice a year.

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