The latest development in the field of infrastructure bonds is the offering from State Bank of India. Known as retail bonds SBI issued its infrastructure bonds from 18th October to 25th October 2010.
Interest rate on SBI Bonds
There are two types of SBI Bonds depending on the interest rate and tenure of the bonds. The first one is known as; Series 1 Lower Tier II Bonds and the second one is called Series 2 Lower Tier II Bond. The first type yields an interest rate of 9.25%, and is for tenure of 10 years and the second one yields an interest rate of 9.50%, and is for a period of 15 years.
In case of redemption the first type that is Series 1 Lower Tier II Bonds can be redeemed after a period of 5 years and the second one that is Series 2 Lower Tier II Bond can be got after 10 years
Demat account is compulsory for investing in SBI Bonds
The one compulsory criteria to invest in the infrastructure bonds of SBI is that you have to have a demat account. In case you do not possess one then you will have to open one at the earliest.
Tax implications of the SBI Retail Bond
SBI Retail Bonds differ from other infrastructure bonds in the sense that they are not covered under section 80 CCF of the Income Tax Act. This means that there will be no reduction from the investor's taxable income.
The interest earned from these bonds will be added to the investors actual income and he or she will have to pay tax on the entire amount.
Features of Infrastructure Bonds by SBI
SBI Infrastructure Bonds will be listed on NSE
The infrastructure bonds issued by SBI will be listed on the National Stock Exchange. If the investor feels like he or she can trade these bonds within the 5 year period itself. Depending on the investor he or she can keep it till maturity or sell it if the market is favorable.
Payment of annual interest
The interest accrued on the retail bonds which includes both the series will be paid on 2nd April every year.
Minimum Investment amount
The minimum amount that the investor can invest is ` 10,000.
Last updated On: 7th May 2011
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