InvestorQ : Is it a good idea to invest in RBI 7.75% taxable bonds? At least the money would be safe, what do you feel?
Mahima Roy made post

Is it a good idea to invest in RBI 7.75% taxable bonds? At least the money would be safe, what do you feel?

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Aditi Sharma answered.
6 months ago


One view that has been floating in the markets is that in the light of the sharp reduction in small savings rates by the government, the RBI bonds may start to look attractive. The 7.75% Government of India Savings (Taxable) RBI Bonds offer an interest rate of 7.75% and are issued by the government of India and is free of credit risk. But does it really make economic sense for you to invest in the bond. Interest on these bonds is calculated annually but payable half-yearly. There is no upper limit for how much money you can put into these bonds but only Indian citizens can apply for these bonds. While the tenor is 7 years, premature withdrawal is allowed for senior citizens. RBI Bonds can be purchased through nationalized banks and some key private banks and can only be held in demat form. However, the interest is fully taxable and that would slice away 30% if your total taxable income is above Rs.10 lakhs. In comparison, a debt fund purely invested in government securities is equally safe and gives around 9% returns on an average. But the good thing in these debt funds is that the tax is at 20% if held for more than 3 years and the effective tax would further get reduced if you consider the indexation benefit.


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Roshni Hegde answered.
5 months ago


“The Government of India 7.75% Savings (Taxable) Bonds, 2018 shall cease for subscription with effect from the close of banking business on Thursday, the 28th of May, 2020,” RBI said in a release.

That means, no investors can now be able to subscribe to RBI's 7.75 % Savings (Taxable) Bonds from May 28.

These RBI bonds had grown popular among regular income seekers like senior citizens and retirees.