Taxable Saving Bonds

FAQs on the GOI 8% Savings (Taxable) Bonds

What are the eligibility criteria for investments in GOI 8% Savings Bond?

(A) an individual, not being an NRI, -

  • in his or her individual capacity
  • in individual capacity on joint basis
  • in individual capacity on anyone or survivor basis
  • on behalf of a minor as father/mother/legal guardian

(B) a Hindu Undivided Family.

(C) -

  • 'Charitable Institution' to mean a Company registered under Section 25 of the Indian Companies Act 1956 or
  • an institution which has obtained a Certificate of Registration as a charitable institution in accordance with a law in force; or
  • any institution which has obtained a certificate from an Income Tax Authority for the purposes of Section 80G of the Income Tax Act, 1961.

(D) -

  • "University" means a university established or incorporated by a Central, State or Provincial Act, and includes an institution declared under section 3 of the University Grants Commission Act, 1956 (3 of 1956), to be a university for the purposes of that Act.

The bonds will be issued for a minimum amount of Rs. 1,000/- (face value) and in multiples thereof. Accordingly, the issue price is Rs 1,000/- per bond. There is no maximum limit for investments in these bonds.

The bonds will bear interest at the rate of 8% per annum. Interest will be payable at half-yearly intervals from the date of issue or compounded with half-yearly rests and will be payable on maturity after 6 years along with the principal, as the subscriber may choose.

The bonds can be subscribed in the form of cash/drafts/cheques. Cheques or drafts should be drawn in favour of the bank and payable at the place where the applications are tendered.

• The Bonds will be issued in the form of Stock Certificate or may be held at the credit of the holder in an account called Bond Ledger Account (BLA)

  • The Bonds in the form of Bond Ledger Account will be issued by and held with the Public Debt Offices of the Reserve Bank of India, designated branches of the agency banks and SHCIL as authorised by Reserve Bank.
  • The Bonds in the form of Stock Certificate will be issued only at the Offices of Reserve Bank of India.
  • The Certificate of Holding in respect of Bond Ledger Account and Stock Certificate will be issued in Green and Yellow colour for cumulative and non cumulative Bonds, respectively.
  • • The Bonds issued in one form will not be eligible for conversion into the other form.

In terms of convenience, applications for bonds in the form of Bond Ledger Account seems better as it will be received at the following places: Offices of the RBI, at Ahmedabad, Bangalore, Bhubaneswar, Mumbai (Fort and Byculla), Calcutta, Guwahati, Hyderabad, Jaipur, Kanpur, Chennai, Nagpur, New Delhi, Patna and Thiruvananthapura.
Branches of State Bank of India, Associate Banks and Nationalised Banks.
Any other banks/bank branches specified by the RBI in this behalf from time to time. On the other hand applications for bonds in the form of Stock certificates will be received only at the offices of RBI, mentioned in (a) above.

The Bonds in the form of Bond Ledger Account and Stock Certificate shall not be transferable.

A sole holder or a sole surviving holder of a Bond, being an individual, may nominate one or more persons who shall be entitled to the Bond and the payment thereon in the event of his death.

The Bonds shall not be tradable in the secondary market and shall not be eligible as collateral for loans from banks, financial Institutions and Non Banking Financial Company (NBFC) etc.

In case of 8% Saving Bonds tax will be deducted at source while making payment of interest on the non-cumulative bonds from time to time and credited to Government Account. Tax on interest portion of the maturity value will be deducted at source at the time of payment of the maturity proceeds on the cumulative bonds and credited to Government Account.

No interest would be payable after maturity in case the bonds are not encashed.

Interest on 8% Saving Bonds will be taxable under the Income-Tax Act, 1961 as applicable according to the relevant tax status of the bondholder. However these bonds will be exempt from Wealth-tax under the Wealth-tax Act.

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