Govt notifies 7.75% bond scheme for retail investors

The government has notified a new 7.75 per cent taxable bond scheme to replace the earlier 8 per cent scheme for retail investors.

These bonds with seven-year maturity would open for subscription from January 10, a Finance Ministry statement said today.

"7.75 per cent Savings Bonds Scheme notified. Would replace 8 per cent Scheme. Will be effective from 10th January. This sequenced notifications and gap of a week was necessary to avoid overlap in cheques realisations," Economic Affairs Secretary S C Garg said in a tweet.

The interest would be payable half-yearly and the cumulative value of Rs 1,000 at the end of seven years will be Rs 1,703.

These taxable bonds to be issued at par are meant for individual other than Non-Resident Indians, it said, adding these are not tradeable in the secondary market and are not eligible as collateral for loans from banking institutions, non-banking financial companies or financial institutions.

In 2003, the government came out with bonds offering 8 per cent interest to encourage retail investors to invest. The bond was open for subscription from April 21, 2003, and had a fixed tenure of six years. There was no upper limit for investment.

Although the Finance Ministry did not give reason for reduction in the rate of such bonds, it is believed that it is in line with the falling interest rate scenario.

These non-transferable bonds will be exempt from wealth- tax under the Wealth Tax Act, 1957, the Finance Ministry statement said.