This govt of India saving instrument will pay you over 6% interest. Details inside

“It may be recalled that FRB, 2031 will carry a coupon, which will have a base rate equivalent to the Weighted Average Yield (WAY) of last 3 auctions (from the rate fixing day i.e. June 7, 2022) of 182 Day T-Bills, plus a fixed spread of one percent. The Weighted average yields will be computed by reckoning 365 days in a year,” the RBI added. 

The rate of interest payable on these bonds is floating and gets changed every six months. The floating rate of interest is subject to change in January & July each year.

The interest payable on these bonds is benchmarked against interest payable on National Saving Certificate (NSC) and is higher by 0.35%. Interest on these bonds is paid half yearly for period ending 30th June and 31st December on 1st July and 1st January every year.

These bonds have a tenure of seven years and there is a premature withdrawal option for senior citizens. The bonds are issued for a minimum amount of Rs. 1000/- (face value) and in multiples thereof, and there is no maximum investment limit. 

Premature redemption facility is allowed for investors in the age group of 60 years and above as per RBI’s notification. The interest income from the bonds is taxable. TDS (Tax Deducted at Source) is deducted at the time of interest payment as per the prevailing rules.

There are specific conditions on premature withdrawal option for senior citizens. The minimum lock-in period from the date of issue is as per investor age bracket. The lock-in period for 60 to 70 years is 6 years whereas for 70 to 80 years its 5 years and age of 80 years & above is 4 years.

These bonds are not tradable and not transferable. They are also not eligible as collateral for availing loans from banks, financial institutions & non-banking companies or NBFCs.