RBI Floating Rate Bond

The RBI Floating Rate Bond is an investment opportunity backed by the government where all Indian residents can invest for a tenure of 7 years. These bonds are accessible and secure, offering varying interest rates that change every 6 months, with the current interest rate being 8.05%. The interest rate of the RBI Floating Rate Bond is linked to the National Savings Certificate rate of 7.7% with an additional spread of 0.35%.

When you invest in the RBI floater bonds you will get interest payout twice a year on January 1st and July 1st, offering you low-risk and a stable regular income. Furthermore, you can start investing with a minimal amount of ₹1000 with no maximum limit, allowing you to invest as per your financial goals.

RBI Floating Rate Savings Bond Details

RBI Floating Rate Savings Bond provides you a great way to grow your money in a low-risk and secured way. Below is an overview of what the RBI Savings Bond offers:

RBI Floating Rate Bond Interest Rate

RBI Floating Rate Bond offers an attractive interest rate that is linked to the interest rate of the National Savings Certificate (NSC) of 7.7% plus an additional 0.35%. So, the current RBI Floating Rate Bond interest rate is 8.05% p.a. The interest rate ensures that investors get a high return on their investment.

The interest is paid in a non-cumulative manner, where you get interest payouts semi-annually on the 1st of January and the 1st of July every year. This structure gives investors safety and security, ensuring regular income.

RBI Floating Rate Bond Lock-in Period

RBI Floating Rate Bonds have a lock-in period of 7 years. The interest is paid out half-yearly on 1st January and 1st July each year. There is no interest earned after the maturity date, and senior citizens can redeem the bond early according to RBI’s rules.

RBI Floating Rate Bond Eligibility Criteria

To invest in the RBI Floating Rate Bond, you will need to fulfil certain eligibility requirements, these are:

• Individuals who are Indian citizens can invest.
• Joint Holdings of RBI Bonds are allowed.
• Hindu Undivided Families are allowed to Invest.
• NRIs are not eligible to invest in RBI Bonds.

Several documents are required for RBI Floating Rate Bond, these are:

• RBI Floating Rate Bond application form
• Identity Proof: PAN card, Aadhaar card, Voter ID, Passport, etc.
• Address Proof: Utility Bills like electricity bill, water bill, Rental Agreement, etc.
• Cancelled Cheque

Features & Benefits of RBI Floating Rate Bond

RBI Floating Rate Bond offers several features and benefits, these are:

• Floating Interest Rate: The bond’s interest rate is linked to the National Saving Certificate (NSC), ensuring that it adjusts with market conditions. The current interest rate is 8.05% to ensure a competitive return.
• Interest Payout: Interest is paid half-yearly, on the 1st January and 1st July each year, providing a steady stream of income for investors.
• Tenure: The bond comes with a tenure of 7 years, making it a mid-term investment option ideal for those who want stable returns over a longer period.
• Taxability: Interest earned on these bonds is taxable under the Income Tax Act, with TDS deducted at source if interest exceeds ₹10,000 in a financial year.
• Minimum Investment: The bond can be purchased with a minimum investment of ₹1,000, making it accessible to a wide range of investors.
• No Maximum Limit: There is no upper investment limit, allowing high-net-worth individuals to invest larger sums for higher returns.
• Higher Returns than NSC: The bond offers 35 basis points more than the NSC, making it a superior option for those seeking higher interest.
• Government-Backed Security: Since it is issued by the Reserve Bank of India (RBI), the bond offers complete security and is a low-risk investment option.
• Interest Rate Flexibility: The floating rate feature ensures that the interest adjusts to current market rates, offering protection against inflation and rising interest environments.

Understanding Floating Rate Bonds

Unlike fixed-rate bonds, where the interest rates of your investment are fixed, floating-rate bonds have a variable interest rate. The interest rate is updated at regular intervals during its term.

The RBI offers floating-rate bonds at interest rates linked to the interest rates of the National Savings Certificate. The maturity period of this bond is 7 years, with interest paid biannually.

Taxation on RBI Floating Rate Savings Bond

The RBI Floating Rate Savings Bond offers attractive returns, however, it does not offer any tax benefits. Here are the taxes incurred on RBI Savings Bond that you need to know:

• Interest Income Taxability: The interest earned from the RBI Floater Bonds is fully taxable under the Income Tax Act, 1961. It is considered part of the investor’s total income and taxed according to their income tax slab.
• TDS (Tax Deducted at Source): Tax Deducted at Source (TDS) is applicable on the interest income from these bonds if it exceeds ₹10,000 in a financial year. The RBI deducts TDS at the rate of 10% if the investor has submitted their PAN (Permanent Account Number). If PAN is not provided, the TDS rate is 20%.
• Wealth Tax: When the RBI Floating Rate Savings Bonds were introduced, investors could enjoy wealth tax deductions, meaning that there would be no wealth tax on the bonds. However, since the Wealth Tax Act was abolished in 2015, the wealth tax benefit was no longer applicable.
• No Tax Benefit on Investment: There are no deductions or exemptions available under the Income Tax Act for the principal amount invested in these bonds. Unlike some other government schemes like PPF or NSC, investments do not qualify for any tax-saving benefits under Section 80C.

Steps to Invest in Floating Bond RBI

Investing in RBI Floating Bonds has become easier through the RBI Retail Direct, here are the steps you can follow:

Invest in RBI Bonds Online through Banks

• Step 1: Go to the official website of an RBI-authorised bank.
• Step 2: Log in to your internet banking account or create a new account.
• Step 3: Find the section for government bonds or investment services.
• Step 4: Choose the specific RBI Floating Rate bond option.
• Step 5: Specify the amount you wish to invest.
• Step 6: Make the payment via net banking.
• Step 7: You will then receive the investment confirmation.

Invest in RBI Bonds Online through RBI Retail Direct

• Step 1: Visit the official RBI Retail Direct portal – https://rbiretaildirect.org.in/#/
• Step 2: Click on ‘Open RBI Retail Direct Account.
• Step 3: You will see the Registration Guide, read it carefully and click on ‘Proceed’.
• Step 4: Enter the account type, full name as per PAN, email address, mobile number, PAN number. Date of Birth and Login name.
• Step 5: Read and accept the Terms and Conditions then Preview your application.
• Step 6: You can then follow RBI’s Know Your Customer (KYC) guidelines for identity verification.
• Step 7: After successful KYC, a Retail Direct Gilt (RDG) account will be opened.
• Step 8: Log in to your account and you will be able to invest in the RBI Floating Rate Savings Bond.

Steps to Invest in RBI Bonds Offline

• Step 1: Visit any authorised bank that offers RBI Floating Rate Bonds.
• Step 2: Request and complete the Floating bond RBI application form.
• Step 3: Provide necessary KYC documents.
• Step 4: Pay the investment amount via cheque or demand draft.
• Step 5: You will then get the bond certificate after the investment amount is processed.

You can also check other related topics of RBI Bond

Did you know, you can get a loan against your investments?
Know more about loans against different assets from the links below: