5 facts about Savings Bonds you need to know!

Savings Bonds are one of the most preferred investment options for people looking for a fixed income source. These bonds are convenient to invest in and offer 7.75% interest rate for the amount invested. These bonds are open for investment to resident individuals and Hindu Undivided Families.  You can read more on how Savings Bond work here.

Before investing, there may be a few questions you may have about the Savings Bond. This guide will help you know all about the Savings Bond, so you can make your investment decision.

Here are 5 facts about Savings Bonds you need to know:

• Savings Bonds are guaranteed by the Government of India:
  
  Savings Bonds have a sovereign guarantee. This means the Government is obligated to return the amount you invested on maturity. This makes the 7.75% Government of India Savings Bond a very safe investment option. If you are wondering are Savings Bonds safe, then the answer is yes. These bonds are one of the safest investment options today.

• The interest on Savings Bonds is taxable:
  
  If you are wondering are Savings Bonds tax free, then the answer is no. Like most other small savings investments, the interest earned on the Savings Bond is taxable. The interest paid out is added to your taxable income and taxed at normal tax rates. These investments are also subject to TDS rules, based on the rules for interest income.

• Savings Bonds have no maximum investment limit:
  
  The minimum investment for Savings Bond is Rs. 1,000. This can be increased in multiples of Rs. 1000. There is no maximum limit of investment. Investors can invest any amount in the Savings Bonds without any problems. It is possible to invest any amount at any time till the time the subscriptions are not closed.

• Savings Bonds have 2 options for interest:
  
  Investors can choose between cumulative and non-cumulative options. In cumulative option, interest is paid out on maturity. The cumulative maturity amount is Rs. 1,703 for an initial investment of Rs. 1,000. Under non-cumulative option, interest is paid out every six months in the bank account of the investor.

• Premature redemption depends on the age of the investor:
  
  Premature withdrawal is allowed, but it depends on the age of the investor. For senior citizens between 60 to 70 years, the lock in period is 6 years. For investors between 70 to 80 years of age, the lock in period is 5 years and for investors above 80 years, the lock in period is 4 years. After that, it is possible for these investors to withdraw their money.

With these facts, you can make a decision to invest in a Savings Bond and earn fixed income on your money!

Looking to invest in a Savings Bond? Approach your nearest HDFC Bank Branch to know more!

* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.