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Rate of interest on Floating Rate Savings Bond, 2020 (Taxable) till December 2021 announced – Check new rate

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The government had launched the Floating Rate Savings Bonds 2020 (Taxable) scheme from July 01, 2020.

RBI has announced the rate of interest on Floating Rate Savings Bond, 2020 (Taxable) for the Period July 2021 – December 2021. The government had launched the Floating Rate Savings Bonds 2020 (Taxable) scheme from July 01, 2020. The coupon rate for the first coupon period, payable on January 1, 2021 was fixed at 7.15 per cent. The coupon rate on Floating Rate Savings Bond, 2020 (Taxable) for period July 1, 2021 to December 31, 2021 and payable on January 1, 2022 remains at 7.15 per cent, unchanged from the previous half-year.

The coupon rate or interest rate is set at a positive spread of 35 basis points or 0.35 per cent over the prevailing NSC rate. The rate of interest on 5-year NSC continues to be 6.8 per cent till September 30, 2021.

Earlier, the government had kept the post office small savings schemes interest rates unchanged for the July-August-September 2021 quarter from the previous quarter.

The Floating Rate Savings Bonds 2020 have a tenure of 7 years and the interest rate will keep varying during the tenure of the scheme. Interest will be paid half-yearly to the investors in July and January of each year. Only specified categories of senior citizens may go for premature redemption of the bonds.

The minimum investment amount is Rs 1000, while there will be no maximum limit for investments made in the Bonds. The maximum investment in cash can be made up to Rs 20,000. One can invest through branches of State Bank of India, Nationalised Banks and four specified private sector banks.

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What to do

As bank fixed deposit rates are falling, the Floating Rate Savings Bonds may offer a better avenue to savers especially senior citizens. The returns are also above NSC but has a slightly longer tenure than NSC. In NSC, there are tax benefit under section 80 C but in the Floating bonds there is no such tax benefit. The interest income in both is fully taxable as per one’s tax slab. Therefore, one should invest keeping one’s tax slab and the tenure of the bonds into context as liquidity is less in these bonds, being non-transferable and not available for trading.

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