If you want to invest your hard-earned money without any market risk and are looking for a fixed and guaranteed regular passive income every 6 months, then 'Floating Rate Savings Bonds' (FRSB) run by the Reserve Bank of India (RBI) have emerged as the most suitable financial option for you. Currently, while most of the general fixed deposit (FD) schemes of banks are offering interest rates around 6.5% to 7.25%, investors are getting an attractive interest rate of 8.05% per annum on this government bond of RBI. The biggest strength of this scheme is that your money is directly protected under the Sovereign Guarantee of the Government of India, that is, the risk of default or capital loss is zero percent. How to get ₹4,025 every 6 months on an investment of ₹1 lakh? The interest payment received under RBI Floating Rate Savings Bonds is transferred electronically directly to the investor's bank account twice a year i.e. every 6 months. Its interest payment dates are fixed on 1 January and 1 July every year. Interest Rate Mathematics: The current interest rate in the scheme is 8.05% per annum. Since interest is paid on half-yearly basis, the interest rate for 6 months works out to be 4.025% (8.05%/2). Calculation on investment of ₹1,00,000: When you invest ₹1 lakh, 4.025% of ₹1,00,000 works out to ₹4,025. Annual and 7-year returns: This means you will get a fixed interest of ₹8,050 every year. The total maturity period of this bond is 7 years. You will get half yearly interest payment a total of 14 times over the course of 7 years, making the total interest earned Rs. 56,350. After completion of 7 years, your principal amount of ₹ 1 lakh will also be returned 100%. Chart of interest received every 6 months on different investment amounts: You can start investing in this RBI bond with a minimum of ₹ 1,000 and no maximum limit has been fixed in it. Understand from the table given below how much interest you will get on different investment amounts in 6 months: Total Investment Amount (Deposit Amount) Half Yearly Interest (Every 6 Months at 4.025%) Annual Total Interest (Annual Payout) Total Interest earned in 7 years (Total Interest) Total Return after 7 years (Principal + Interest) ₹1,00,000 (1 Lakh) ₹4,025 ₹8,050 ₹56,350 ₹1,56,350 ₹2,00,000 (2 lakh) ₹8,050 ₹16,100 ₹1,12,700 ₹3,12,700 ₹5,00,000 (5 lakh) ₹20,125 ₹40,250 ₹2,81,750 ₹7,81,750 ₹10,00,000 (10 lakh) ₹40,250 ₹80,500 ₹5,63,500 ₹15,63,500 ₹25,00,000 (25 lakh) ₹1,00,625 ₹2,01,250 ₹14,08,750 ₹39,08,750 ₹50,00,000 (50 lakh) ₹2,01,250 ₹4,02,500 ₹28,17,500 ₹78,17,500 It is clear from the table that if a senior citizen or investor invests a lump sum of ₹10 lakh, he will continue to receive a fixed pension-like income of ₹40,250 sitting at home every six months. What does 'floating rate' mean and how is the rate of 8.05% determined? The word 'floating' is added to the name of this bond because its interest rate does not remain fixed for the entire period of 7 years, but is revised by the government from time to time. Direct link to National Savings Certificate (NSC): As per the formula of the Ministry of Finance, Government of India, the interest rate of this bond is linked to the rate of the popular post office scheme 'National Savings Certificate' (NSC). 0.35% higher interest rate than NSC: RBI FRSB interest rate is always kept +0.35% (35 basis points) higher than the current NSC rate. Currently the interest rate of 7.70% is applicable on NSC. On this basis, the interest rate of FRSB bonds has been fixed at 8.05% by adding 7.70% + 0.35%. The government reviews small savings schemes every 6 months (1 January and 1 July); If the NSC rate increases in future, the interest on this bond will also automatically increase. Lock-in Period and Pre-Mature Withdrawal Rules for Senior Citizens The normal maturity period of RBI Floating Rate Savings Bonds is 7 years. For general investors (below 60 years of age), withdrawal is not allowed before 7 years. However, respecting the emergency financial needs of elderly and retired citizens, the government has provided special exemption to senior citizens for Premature Redemption: Investors aged 60 to 70 years: Can withdraw their money any time after completion of 6 years from the date of investment. Investors aged 70 to 80 years: Pre-mature withdrawal facility is available after completion of 5 years. Above 80 years (Super Senior Citizen): Can encash your bonds only after completion of 4 years. Note: In case of premature withdrawal, 50% of the interest payable for the respective half year is deducted as penalty. Taxation and Eligibility: Will this interest be taxable? Tax as per tax slab: The interest earned from this bond is fully taxable. This is added to the investor's annual income under 'Income from Other Sources' and tax is applicable as per the respective income tax slab. TDS deduction: If the interest earned in a financial year exceeds ₹10,000 (₹50,000 in case of senior citizens), banks deduct TDS as per rules. Investors covered under tax exemption can avoid TDS by submitting Form 15G or 15H. Trading and Transfer: These bonds cannot be sold or bought in the stock market or secondary market, nor can any loan (Collateral/Pledge) be taken from the bank against them. It can be transferred from one person to another only in the event of nomination or death. Who can invest: Any single citizen of India, two adults jointly, or a guardian on behalf of a minor can invest in it. Hindu Undivided Families (HUF) are also eligible, while non-resident Indians (NRIs) cannot make fresh investments in it. How to apply? How to buy online from home and from the bank: There are two very simple and safe means of investing in RBI Floating Rate Savings Bond: RBI Retail Direct Portal: You can open your 'Retail Direct Gilt (RDG) Account' online by directly visiting the official portal of RBI at rbiretaildirect.org.in without any middleman or commission. This requires Aadhar Card, PAN Card and Net Banking/UPI. You can buy government bonds directly by logging in to the portal. Authorized Bank Branches: If you want to invest offline, you can apply through check by filling the form and visiting any nearest branch of the country's largest banks State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda or major private banks (HDFC Bank, ICICI Bank, Axis Bank). After successful allotment, a 'Bond Ledger Account' (BLA Certificate) is issued in your name in electronic form.
