Investments
Savings Bonds are one of the most preferred investment options for people looking for a fixed-income source. These bonds are convenient to invest in and offer a 7.75% interest rate for the amount invested. These bonds are open for investment to resident individuals and Hindu Undivided Families. You can read more on how Savings Bond works here.
Before investing, you may have a few questions about the Savings Bond. This guide will help you know about the Savings Bond, so you can decide your investment.
Here are five facts about Savings Bonds you need to know:
If you wonder if savings bonds are safe, then yes. Savings Bonds have a sovereign guarantee. That means it is the responsibility of the Government of India to return the amount you invested on maturity. This feature makes the 7.75% Government of India Savings Bond a safe investment option.
If you wonder if savings bonds are tax-free, then the answer is no. Like most other small savings investments, the interest earned on the Savings Bond is taxable. The interest paid out is added to your taxable income and taxed at normal tax rates. These investments are also subject to TDS rules.
According to Section 193 of the Income Tax Act of 1961, interest income from bonds is subject to Tax Deducted at Source (TDS) at a rate of 10% for both listed and unlisted bonds. Individuals in lower tax brackets can use forms 15G or 15H to prevent excessive TDS deductions.
The minimum investment for a Savings Bond is ₹1,000. This can be increased in multiples of ₹1000. There is no maximum limit of investment. Investors can invest any amount in the Savings Bonds without any problems. Investing any amount at any time is possible until the subscriptions are closed.
Investors can choose between cumulative and non-cumulative options. In the cumulative option, interest is paid out on maturity. The cumulative maturity amount is ₹1,703 for an initial investment of ₹1,000. Under the non-cumulative option, interest is paid out every six months in the bank account of the investor.
Premature withdrawal is allowed, but it depends on the investor's age. The lock-in period is six years for senior citizens between 60 to 70 years. For investors between 70 to 80 years of age, the lock-in period is five years; for investors above 80 years, the lock-in period is four years. After that, these investors can withdraw their money.
With these facts, you can invest in a Savings Bond and earn a fixed income on your money!
Looking to invest in a Savings Bond? Approach your nearest HDFC Bank Branch to know more!