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Home  > Products > Distribution > Online Bonds

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    About Bonds

Online Bonds

  • A Bond is a debt instrument issued for the purpose of raising capital by borrowing.
  • Bonds can be issued by companies, financial institutions or the government. Bonds issued by the government are considered the safest bonds.
  • Bonds can be divided into different categories based on tax status, credit rating, issuer type and maturity.
  • Bonds are suitable for regular income purposes.
  • Specific tax saving or tax free bonds are available that offer certain tax benefits to the investor.

7.75% RBI Taxable Bonds

  • The 7.75% Government of India Savings (Taxable) Bonds, 2018 is a bond issued by the Reserve bank of India (RBI) commencing April 21, 2003. The bonds are available for Individuals & HUF. As the name indicates, the rate of interest offered on the bonds is 7.75% per annum. Interest on bonds is taxable and it has a lock in of 7 (seven) years. Since bonds are issued on behalf of Government of India, it is the safest investment any investor can look for.

Tenure ROI(%) P.A Issue Price Compounding
7 Years 7.75% Rs.1000 Half Yearly
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Salient Features
  • Eligibility for Investments
  • The Bonds may be held by An individual, not being a Non-Resident Indian (NRI) , A Hindu Undivided Family.
  • Limit of Investment
  • There will be no maximum limit for investment in the Bonds.
  • Tax Treatment
  • Interest on the Bonds will be taxable under the Income-Tax Act, 1961 as applicable according to the relevant tax status of the bond holder.

    • Interest on the Bonds will be taxable under the Income-Tax Act, 1961 as applicable according to the relevant tax status of the bond holder.
    • The Bonds will be exempt from Wealth-tax under the Wealth- Tax Act, 1957.

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  • Issue Price
  • The Bonds will be issued at par

    • The Bonds will be issued at par
    • The Bonds will be issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof. Accordingly, the issue price will be Rs.1000/- for every Rs.1,000/-(Nominal) face value.

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  • Subscription
  • Subscription to the Bonds will be in the form of Cash/ Drafts/ Cheques or any electronic mode acceptable to the receiving office

    • Subscription to the Bonds will be in the form of Cash/ Drafts/ Cheques or any electronic mode acceptable to the receiving office.
    • Cheques or drafts should be drawn in favour of “HDFC Bank A/C Govt of India 7.75% Saving Taxable Bond 2018”.

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  • Nomination
  • A sole holder or all the joint holders (investors) of a Bond, being individual/s, may nominate in Form B annexed to this notification (Annexure 4) or as near thereto as may be, one or more persons who in the event of death of the sole holder/all the joint holders, as the case may be, would be entitled to the Bonds and to the payment due thereon, provided that the person or each of the persons nominated is himself/herself is competent to hold the Bond.

    • A sole holder or all the joint holders (investors) of a Bond, being individual/s, may nominate in Form B annexed to this notification (Annexure 4) or as near thereto as may be, one or more persons who in the event of death of the sole holder/all the joint holders, as the case may be, would be entitled to the Bonds and to the payment due thereon, provided that the person or each of the persons nominated is himself/herself is competent to hold the Bond.
    • Where the nomination has been made in favour of two or more nominees and either or any of them dies before such payment becomes due, the title to the Bonds shall vest in the surviving nominee or nominees and the amount being due thereon shall be paid accordingly.
    • In the event of the nominee or nominees predeceasing the holder, the holder may make a fresh nomination.
    • The investor(s) can make separate nomination for each investment.
    • No nomination shall be made in respect of the Bonds issued in the name of a minor.
    • A nomination made by a holder of a Bond can be changed by a fresh nomination in Form B, or as near there to as may be, or may be cancelled by giving notice in writing to the Receiving Office in Form C, annexed to the notification (Annexure 5).
    • Every nomination and every cancellation or variation shall be registered at the Receiving Office where the Bond is issued and shall be effective from the date of such registration.
    • If the nominee is a minor, the holder of Bonds may appoint any person to receive the Bonds/ amount due in the event of his / her / their death during the period the nominee is a minor.

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  • Transferability
  • The Bonds held to the credit of Bonds Ledger Account of an investor shall not be transferable.
  • Interest
  • The Bonds will be issued in ‘Cumulative’ or ‘Non-cumulative’ form, at the option of investor and will bear interest at the rate of 7.75% per annum.

    • The Bonds will be issued in ‘Cumulative’ or ‘Non-cumulative’ form, at the option of investor and will bear interest at the rate of 7.75% per annum.
    • Interest on non-cumulative Bonds will be payable at half-yearly intervals from the date of issue in terms of paragraph 7 above and interest on cumulative Bonds will be compounded with half-yearly rests and will be payable on maturity along with the principal.
    • In the latter case, the maturity value of the Bonds shall be Rs. 1,703.00 (being principal and interest) for every Rs. 1,000/-(Nominal).
    • Interest to the holders opting for non-cumulative Bonds will be paid from date of issue in terms of paragraph 7 above up to 31st July / 31st January as the case may be, and thereafter half-yearly for period ending 31st July and 31st January on 1st August and 1st February.
    • Interest on Bonds held to the credit of Bonds Ledger Account of an investor will be paid, electronically by credit to bank account of the holder as per the option exercised by the investor/ holder.

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  • Tax Deduction at Source
  • 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 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 the 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.
      Provided that tax will not be deducted while making payment of interest/ maturity proceeds, as the case may be, to individual/s who have made a declaration in the application form that they have obtained exemption from tax under the relevant provisions of the Income Tax Act, 1961 and have submitted a true copy of the certificate obtained from Income Tax Authorities.

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  • Repayment
  • The Bonds shall be repayable on the expiration of 7 years from the date of issue.

    • The Bonds shall be repayable on the expiration of 7 years from the date of issue.
    • Premature encashment in respect of the Bonds shall be allowed for individual investors in the age group of 60 years and above, subject to submission of document relating to date of birth of the investor in support of age to the satisfaction of the issuing bank, after minimum lock in period from the date of issue as indicated below:

        a. Lock in period for investors in the age bracket of 60 to 70 years shall be 6 years from the date of issue.
        b. Lock in period for investors in the age bracket of 70 to 80 years shall be 5 years from the date of issue.
        c. Lock in period for investors in the age of 80 years and above shall be 4 years from the date of issue.
    • In case of joint holders or more than two holders of the Bond, the above lock in period will be applicable even if any one of the holders fulfills the above conditions of eligibility.
    • After aforesaid minimum lock in period from the date of issue an eligible investor can surrender the bonds at any time after the 12th, 10th and 8th half year corresponding to the respective lock in period but redemption payment will be made on the following interest payment due date. Thus, the effective date of premature encashment for eligible investors will be 1st August and 1st February every year. However, 50% of interest due and payable for the last six months of the holding period will be recovered in such cases, both in respect of Cumulative and Non-cumulative bonds.

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Capital Gain Bonds

  • In accordance with section 54 EC of the Income Tax Act, 1961, all categories of tax payers would be eligible to save tax in respect of long term capital gains by making investments in certain Bonds prescribed.
  • These bonds are classified as 'long-term specified asset' and are issued by REC, NHAI, PFC and IRFC.
  • These bonds are specifically for investors who have made some long term capital gains, and would like to save capital gain taxes on this amount.
  • Only long term capital gains are eligible for these bonds though, and short term gains are not covered under section 54EC.
  • The interest from these bonds is fully taxable

Condition for Exemption from Tax U/S 54 EC:

  • The entire capital gain realized is invested within 6 Months of the date of transfer in eligible bonds
  • Such investment is held for 5 Years
  • To avail of capital gain exemption, the bonds so acquired cannot be transferred or converted into money or any loan or advance can be on security of such bond with 3 years from date of acquisition else, the benefit would be withdrawn.
  • If the amount invested in bonds is less than the capital gains realized, only proportionate capital gains would be exempt from tax.

REC Capital Gains Bonds

  • Rural Electrification Corporation Limited (REC) is a Navratna Company functioning under the purview of the Ministry of Power.
  • It’s a public Infrastructure Finance Company in India’s power sector.
  • The company finances and promotes rural electrification projects across India.
  • The company provides loans to Central/ State Sector Power Utilities, State Electricity Boards, Rural Electric Cooperatives, NGOs and Private Power Developers.
  • The company is listed on both National Stock Exchange and Bombay Stock Exchange.
  • Business operations in India are supported by a network of 13 Project Offices and 5 Zonal Offices, headquartered in New Delhi.

Rural Electrification Corp Bonds

Company Name Rating ROI (%) Tenure Minimum Application Maximum Application Tax Status Transferability Mode of Interest Interest Payable on
REC AAA 5.75% 5 years 20000
(2 bonds)
5000000
(500 Bonds)
Taxable Not Allowed Annually 30th June
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NHAI Capital Gain Bonds Series XII

  • National Highways Authority of India (NHAI) is an autonomous agency of the Government of India, responsible for management of a network of over 50,000 km of National Highways out of 1,15,000 km in India.
  • It is a nodal agency of the Ministry of Road Transport and Highways.
  • NHAI has signed a memorandum of understanding (MoU) with the Indian Space Research Organization for satellite mapping of highways.
  • The Authority was operationalized in February, 1995 .
  • The company is listed on both National Stock Exchange and Bombay Stock Exchange

National Highway Authorty of India Bonds

Company Name Rating ROI (%) Tenure Minimum Application Maximum Application Tax Status Transferability Mode of Interest Interest Payable on
NHAI AAA 5.75% 5 years 10000
(1 bond)
5000000
(500 Bonds)
Taxable Not Allowed Annually 1st April
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PFC Capital Gain Bonds Series I

  • The Power Finance Corporation Ltd. Incorporated on July 16th, 1986, Company was conferred the title of a 'Navratna CPSE' in June, 2007 and it’s a leading Non-Banking Financial Corporation in the Country.
  • It is the financial back bone of Indian Power Sector.
  • PFC's registered office is located at New Delhi and regional offices are located at Mumbai and Chennai.
  • It’s a consistently profit-making and dividend-paying company & also Strong asset quality reflected in low NPAs in the company.The company is listed on both National Stock Exchange and Bombay Stock Exchange

Power Finance Corporation Capital Gain Bonds Series I

Company Name Rating ROI (%) Tenure Minimum Application Maximum Application Tax Status Transferability Mode of Interest Interest Payable on
PFC AAA 5.75% 5 years 20000
(2 bonds)
5000000
(500 Bonds)
Taxable Not Allowed Annually 31st July
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IRFC Capital Gain Bonds Series I

  • Indian Railway Finance Corporation (IRFC) was set up on 12th December, 1986 as the dedicated financing arm of the Indian Railways for mobilizing funds from domestic as well as overseas Capital Markets.
  • IRFC is a Schedule ‘A’ Public Sector Enterprise under the administrative control of the Ministry of Railways, Govt.
  • In more than 30 years of existence, IRFC has played a significant role in supporting the expansion of the Indian Railways and related entities by financing a significant proportion of its annual plan outlay.
  • Company raises money through financial bonds and from banks and financial institutions.

Indian Railway Finance Corporation Capital Gain Bonds Series I

Company Name Rating ROI (%) Tenure Minimum Application Maximum Application Tax Status Transferability Mode of Interest Interest Payable on
IRFC AAA 5.75% 5 years 20000
(2 bonds)
5000000
(500 Bonds)
Taxable Not Allowed Annually 15th October
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