India Tax saving bonds
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Tax-saving bonds in India are proposed to lessen the tax liabilities of a bond holder either partially or completely. These bonds are generally issued by government in the form of RBI bonds and by certain private banks like ICICI, IDBI, HDFC, etc.
RBI Relief Bonds or RBI Bonds
RBI Bonds are the tax saving instruments offered by the government bank RBI, to permit the investor to save his money on tax. The interest on RBI bonds is compounded on the basis of six months with the maturity period of five years. The benefit of RBI bonds is that the interest which the investor receives is tax free.
8.5 per cent RBI Relief Bond is the perfect bond for investors in the uppermost tax category looking for returns that are predetermined, guaranteed and completely tax-free. RBI Relief Bond does not have any maximum limit to the investment charges and has appointed the face value of ` 1,000 for each bond.
In this case an investor can either chose to invest his 5 lakhs by either purchasing one bond worth ` 5 lakh or 50 bonds with the face value of ` 1,000 each. It is best to opt for smaller face value, as when the need arises the withdrawal process becomes simple and uncomplicated.
There are many private banks that offer tax saving bonds which can reduce the tax burden of a bond holder upto 15,000 per annum. Some of the most popular tax saving bonds issued by private banks are:
ICICI Tax Saving Bond
ICICI bank issues its Tax Saving Bond in the name of ICICI Safety Bonds and helps in lessening the tax liability of the investor upto ` 16,000 per annum under Section 88 of the Income Tax Act, 1961.
ICICI tax saving bond offers three options to its investors, all under Tax Benefit Section 88 with the issue price of ` 5000 for each investment option.
For option I the face value is ` 5,000 with an interest rate of 9% per annum in its 3 years tenure.
For option II the face value is ` 6,600 with an interest rate of 9% per annum in its 3 years and 4 months tenure. The Tax Saving Bond Option II is the type of Deep Discount Bond (DDB) and hence do not demand reimbursement of any periodic interest.
For option III the face value is ` 9,000 with an interest rate of 9.5% per annum in its 6 years and 6 months tenure. The Tax Saving Bond Option III is also a type of Deep Discount Bond (DDB) and hence do not demand reimbursement of any periodic interest.
IDBI Tax Saving Bond
IDBI bank issues it's Tax Saving Bond in the name of IDBI Flexibonds which is popular among investors for its yield-to-maturity offer. IDBI Flexibonds' attractiveness indicates the investor's penchant for such bonds for the purpose of reducing their tax liability upto ` 16,000 per annum.
IDBI Flexibonds offers two options but to go ahead with the investment procedure the investor will have to select any one from Deep Discount Bond (DDB) Option C & D along with a compulsory Option A which is simple bond with interest payable per annum. Secondly, the investor will have to select between 3year and 5 year bond.
A three year bond is apt if the investor, after the completion of its 3 years bond, wants to invest for another reasonably longer period in debt investments or in stocks. Otherwise, he can opt for the five-year option.
Other commercial and private banks which offer Tax Saving Bonds are:
Tax Saving bonds issued by Government
RBI Relief Bonds or RBI Bonds
RBI Bonds are the tax saving instruments offered by the government bank RBI, to permit the investor to save his money on tax. The interest on RBI bonds is compounded on the basis of six months with the maturity period of five years. The benefit of RBI bonds is that the interest which the investor receives is tax free.
8.5 per cent RBI Relief Bond is the perfect bond for investors in the uppermost tax category looking for returns that are predetermined, guaranteed and completely tax-free. RBI Relief Bond does not have any maximum limit to the investment charges and has appointed the face value of ` 1,000 for each bond.
In this case an investor can either chose to invest his 5 lakhs by either purchasing one bond worth ` 5 lakh or 50 bonds with the face value of ` 1,000 each. It is best to opt for smaller face value, as when the need arises the withdrawal process becomes simple and uncomplicated.
Tax Saving Bonds issued by Private Banks
There are many private banks that offer tax saving bonds which can reduce the tax burden of a bond holder upto 15,000 per annum. Some of the most popular tax saving bonds issued by private banks are:
ICICI Tax Saving Bond
ICICI bank issues its Tax Saving Bond in the name of ICICI Safety Bonds and helps in lessening the tax liability of the investor upto ` 16,000 per annum under Section 88 of the Income Tax Act, 1961.
ICICI tax saving bond offers three options to its investors, all under Tax Benefit Section 88 with the issue price of ` 5000 for each investment option.
For option I the face value is ` 5,000 with an interest rate of 9% per annum in its 3 years tenure.
For option II the face value is ` 6,600 with an interest rate of 9% per annum in its 3 years and 4 months tenure. The Tax Saving Bond Option II is the type of Deep Discount Bond (DDB) and hence do not demand reimbursement of any periodic interest.
For option III the face value is ` 9,000 with an interest rate of 9.5% per annum in its 6 years and 6 months tenure. The Tax Saving Bond Option III is also a type of Deep Discount Bond (DDB) and hence do not demand reimbursement of any periodic interest.
IDBI Tax Saving Bond
IDBI bank issues it's Tax Saving Bond in the name of IDBI Flexibonds which is popular among investors for its yield-to-maturity offer. IDBI Flexibonds' attractiveness indicates the investor's penchant for such bonds for the purpose of reducing their tax liability upto ` 16,000 per annum.
IDBI Flexibonds offers two options but to go ahead with the investment procedure the investor will have to select any one from Deep Discount Bond (DDB) Option C & D along with a compulsory Option A which is simple bond with interest payable per annum. Secondly, the investor will have to select between 3year and 5 year bond.
A three year bond is apt if the investor, after the completion of its 3 years bond, wants to invest for another reasonably longer period in debt investments or in stocks. Otherwise, he can opt for the five-year option.
Other commercial and private banks which offer Tax Saving Bonds are:
- Central Bank of India
- Dena bank
- HDFC
- UTI Bank Ltd.
- Punjab National Bank
- Bank of Maharashtra
- Indian Overseas Bank
- Canara Bank
- Bank of Baroda
- Indian Bank
- Union Bank
- Syndicate Bank
- Allahabad Bank
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