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Government stops subscription for 8 per cent GoI savings bond

The bonds have been popular on account of offering a higher rate of interest than small savings and fixed deposit rates.

Reported by: IANS, New Delhi [ Published on: January 01, 2018 22:47 IST ]
Government stops subscription for 8 per cent GoI savings
Government stops subscription for 8 per cent GoI savings bond

The government on Monday announced that its GOI Savings Bonds, 2003, earning 8 per cent interest per annum, will cease subscription from January 2.

The bonds have been popular on account of offering a higher rate of interest than small savings and fixed deposit rates.

"The Government of India announced here today that 8 per cent GOI Savings (Taxable) Bonds, 2003, shall cease for subscription with effect from the close of banking business on Tuesday, January 2, 2018," a Finance Ministry release said. 

The bonds, with a tenure of 6 years, minimum investment of Rs 1,000, no limits on maximum investment and the option to receive interest on a half-yearly basis, are available in physical form only and are not listed or tradable on stock exchanges. 

The interest received from these bonds is taxable at the marginal rate of income tax the investor is liable for. 

These became a preferred choice for investors seeking fixed income like senior citizens and pensioners after the government cut interest rates on fixed deposits and small savings schemes like the post office monthly income scheme and public provident fund (PPF) to below 8 per cent in April 2016.

Last week, the government cut the interest rates on small saving schemes, including National Savings Certificates (NSCs), Public Provident Fund (PPF) and Kisan Vikas Patra (KVP), by 0.2 percentage point for the fourth quarter of the fiscal (January-March).

The PPF and NSCs earn 7.6 per cent interest from January 1, while KVPs earn even less (7.3 per cent).

Earlier, PPF, NSC and KVP were offering 7.8, 7.8 and 7.5 per cent interest, respectively.

Besides, while the interest on the Senior Citizen's Savings Scheme of five-year period was retained at 8.3 per cent, the Sukanya Samriddhi Yojana for the girl child now offers 8.1 per cent.

The government also retained the interest on savings deposits at 4 per cent, compounded annually.

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