Floating Rate Savings Bonds: Who Qualifies and What You Get
Learn how these savings bonds work, including interest rates, the 7-year lock-in period, and how your earnings are taxed.
These are savings instruments that offer an interest rate that changes periodically based on the rates set for National Savings Certificates (NSC). Because the interest rate is not fixed, it can adjust over time to reflect current market conditions.
Who it's for
This scheme is open to resident individuals. This means you must be a resident of the country to qualify for these specific bonds.
What you get
The primary benefit of this scheme is the interest you earn on your investment. The interest rate is not a single fixed number; instead, it is linked to the prevailing National Savings Certificate (NSC) rate. To provide a slightly higher return than the standard NSC, this bond includes an additional spread of 0.35% added to that base rate.
What it costs you
To participate in this scheme, you must meet a minimum investment requirement. You can start your investment with as little as ₹1,000. Once you have committed your funds, you must be aware of the lock-in period. This is a 7-year term, meaning your money is committed to the scheme for that duration and cannot be easily accessed before that time has passed.
The catch to know
The most important thing to keep in mind regarding your returns is how they are treated by tax authorities. Unlike some other savings options that might be tax-exempt, the interest earned from these bonds is fully taxable. The amount of tax you owe will depend on your personal income tax slab rate.
How to apply
- Contact your bank or an authorized financial institution to confirm their specific process for issuing these bonds.
- Prepare your necessary identification and residency documents to prove you meet the eligibility requirements.
- Complete the necessary paperwork and make your initial investment of at least ₹1,000.