An investment avenue in which an investor loans money to an entity (government or corporate) that borrows funds for a defined period of time at a fixed interest rate. Bond market has not attracted retail investors to it. But in recent times, lackluster equity markets and low rate of interest have attracted retail investors towards bonds issued by corporate.

Bonds as issued by the Reserve Bank Of India (RBI). The rate of interest offered is 7.15%, payable half yearly with cumulative and non-cumulative option available. Tenure is six years.
Advantages: safety, guaranteed return.
Disadvantage: interest is taxable.

Government securities

Retail investors have not tapped this investment avenue as much as others. It is good for investors looking for reasonable returns with no risk of default as the securities the Government offers these securities. These securities can be held in a demat format. The market is limited so liquidity can be a problem. Investors need to have a thorough knowledge of this investment format to invest in them. Well, then if you are the one who prefer the comforts of safety to the greed of high returns all the above debt instruments are yours to invest in.

Holding

The Bonds may be held by:

(i) an individual, not being a Non-Resident Indian-

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

(ii) 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 holders.
• The Bonds will be exempt from wealth-tax under the Wealth Tax Act, 1957.

Issue Price

• The Bond will be issued at par i.e. at Rs. 100.00.
• The Bonds will be issued for a minimum amount of Rs. 1,000 (face value) and in multiples thereof. Accordingly, the issue price will be Rs. 1,000 for every Rs. 1,000 (Nominal) face value.

Subscription

• 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 the bank (Receiving Office), specified in paragraph 10 below and payable at the place where the applications are tendered.