Sunday, April 11, 2010

Types of Bonds

Types of Bonds
• RBI Relief Bonds
• Saving Bonds Of Reserve Bank
• NRI Bonds
• Tax free Bonds of Public Sector
• Taxable Bonds Of private Sector
• Deep discount Bonds
• Capital Gains Bonds

RBI Relief Bonds

The RBI has stopped the issue of these Bonds with effect from 1.3.2003. Investment in Relief Bonds was particularly suitable for persons who are in the highest income bracket. The main reason why the investment was lucrative is that the entire interest income from the Relief Bond is completely exempt from income tax. Earlier Relief Bonds bearing interest of 10%, 9%,8.5% and 7% p.a were issued. The lock in period of these Bonds ,popularly known as Rahat patras, is five years. Besides , there is no wealth tax on an unlimited amount of these bonds. If the Bonds are sold before maturity then while computing the long term capital gain/loss the cost Inflation Index cannot be applied .

Saving Bonds Of Reserve bank

The Reserve bank of India has issued two new types of Bonds . These Bondds are known as 6.5% (Tax exempt)savings Bonds and 8% (Taxable)savings Bonds. The interest income from tax-free Bonds was completely exempt from would be liable to tax on the same with no exemption or deduction of income tax act under section 10. The investment in 6.5% saving Bonds, 2003 , Have been suspended with effect from 2004, hence presently the investment in tax free bonds of RBI cannot be made. However , do continue to watch details in the newspaper about new tax free Bonds which may be issued in future.

Now TDS @ 10% with applicable surcharge as well as education cesses would be applicable on interest in excess of RS 10,000 p.a from the taxable savings Bonds issued by the Reserve Bank of India

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