Should You Buy The New Floating Rate GOI Bonds? - YouTube

Here, we will discuss about taxable and floating rate GOI Bonds

These bonds got re-launched in the first week of July with a floating rate and till May-end had a fixed rate

The previous rate was going at 7.75% p.a

Now they are floating rate bonds

Now their interest is taxable

Should you be investing in them? We will be talking about the features

We will discuss why and how they are interesting as investments

At May-end people could still buy taxable fixed rate GOI bonds

The new floating rate bonds are available at 7:15% p.a

Of course, the interest rate is floating

The floating interest rate of these GOI Bonds is benchmarked to the National Savings Certificate (NSC)

GOI Bond interest rate will be 35 basis points or 0:35 percentage points higher than the interest rate of NSC

This is an investment with a 7-year tenure or term

Twice in a year i.e. July 1 and January 1, the interest can be reset

The revision would be based on the revision of NSC rate and would be 35 basis points higher

Compared to GOI Bonds, the alternative for regular income Senior Citizen Savings Scheme is available for 5 years

You can go for GOI Bonds for Rs 1,000 or its multiples

You can buy the bonds in different formats such as individually and either or survivor

Hindu Undivided Family (HUF) can do it though NRIs are not allowed to invest in them

The bond issuance is digital

You can buy them from any public sector banks or 4 private sector banks

You get no interest beyond the maturity date of the GOI Bonds

Why GOI Bonds become comparable with Senior Citizens Savings Scheme with its fixed interest rate

Right now, Senior Citizens Savings Scheme provides 7.4% p.a

Thus, GOI Bonds are less rewarding than Senior Citizens Savings Scheme

However, Senior Citizens Scheme has an upper investment limit of Rs 15 lakh whereas there is no limit for GOI Bonds

For creating regular income, especially retirement income, you need to consider GOI Bonds

This is because it is government-backed

One needs to also see this in the backdrop of bank interest rates going down

There might be some banks or government-backed or supported NBFCs may offer higher rates

With interest rates going down, you want a freeze or lock on the interest rates

If you are not a senior citizen and want to invest more than Rs 15 lakh

In such cases, GOI Floating Rate Taxable Bonds becomes an important option

Of course, if an alternative is paying higher interest rates, check how secure the investment is

You can make a premature exit from GOI Bonds

If you are above 80 years, you can make a premature exit in 4 years

Between age 70 and 80, it is five years

Between 60 to 70 years, it is six years

In case of a premature exit, there is a penal interest rate of 50 basis points or 50 percentage points charged

GOI Bonds are not transferrable

Proceeds gets transferred to nominees on death

GOI Bonds are useful for regular income regardless of anyone's age

Of course, there would be higher paying FDs for senior citizens