ADVERTISEMENT
Retail inflation bonds: top 10 things to know
30 Dec 2013, 09:10 PM IST 
- Who can buy: Indian citizens (in individual capacity or joint basis). They can be bought on behalf of a minor. Non-resident Indians are not allowed to invest in these bonds.
- Investment limit: Minimum and maximum limits are Rs 5,000 and Rs 5 lakh per applicant per annum.
- Issue price: The bonds will be issued at par, which means the issue price will be Rs 5,000 or in multiples thereof.
- How to subscribe: These bonds will be sold through authorised banks like State Bank of India, HDFC Bank, ICICI Bank, and Axis Bank. Payment mode could be in the form of cash/drafts/cheques/online.
- Interest rate will be 1.5 per cent above the consumer or retail inflation rate. So, if retail inflation is 10 per cent, subscribers can get 11.5 per cent. The interest will be compounded half yearly. The CPI data will be used with a three-month lag for calculating inflation. So, CPI for September will be used as reference CPI for all days of December.
- Tradability: The bonds shall not be tradable in the secondary market.
- Tenor and repayment: The maturity of the bonds will be 10 years and the interest will be paid out only at maturity. Senior citizens can redeem after one year of holding; others will have to hold for three years for early redemption and will have to pay penalty at the rate of 50 per cent of the last coupon payable.
- Loan: The bonds shall be eligible as collateral for loan from banks, financial institutions and non-banking financial company.
- Tax treatment: The interest on the bonds will be taxable. For this, the interest will be added to the annual income of the taxpayer and taxed at the applicable slab.
- Should you subscribe: The tax treatment of these bonds make them unattractive vis-a-vis tax-free bonds (which have been issued by government institutions like NTPC, IIFL and Hudco) and PPF investments, which are not taxed. Besides, these bonds will lose their attractiveness when retail inflation comes down.
Get live Stock market updates, Business news, Today’s latest news, Trending stories, and Videos on NDTV Profit.
ADVERTISEMENT
