InvestorQ : I want to buy RBI bonds that can give tax benefits along with a good interest rate?
Anusha Savla made post

I want to buy RBI bonds that can give tax benefits along with a good interest rate?

simran Kaur answered.
1 year ago
RBI bonds are sold with a maturity period of five years, but they can be liquidated on the open market before maturity. However, only citizens of India or non-resident Indians may invest in RBI bonds. Most RBI bonds are for five years in length and the return is tax-free. RBI bonds are available through any Reserve Bank of India branch and are backed by the Indian government. The central government issues government bonds, dated securities, and other savings instruments, while the country's individual state governments offer State Department Loans or SDLs.

RBI bonds are of various types and tenures. The key ones are as follows-

RBI Treasury Bills- The Reserve Bank of India offers short term treasury bills of three lengths, 91-day, 182-day, and 364-day T-bills. These are zero-coupon bills, which means that they offer no interest. Instead, they are sold at a discounted issue price and are redeemable at maturity for full face value. The return to the investor is the difference between the issue price and the maturity value.

RBI Cash Management Bills- The Indian Government and Reserve Bank of India also offer short-term investments called Cash Management Bills, or CMBs, in terms shorter than the 91-day T-bills. Proceeds from these bills are used to address any immediate shortages in the government's cash flow, and availability is determined by the needs of the government. Like T-bills, CMBs are sold at a discount and are redeemed at face value upon maturity. The time to maturity and discounted price are determined at auction by the RBI.

RBI Dated Government Securities- The Reserve Bank of India also offers a variety of long-term investments in lengths of up to thirty years. These securities have a coupon, or interest rate, which typically pays interest twice a year. The RBI issues fixed-rate bonds, in which the coupon rate does not change; floating rate bonds, where the coupon rate does adjust by adding a spread over the base rate; long-term zero-coupon bonds which are sold at a discount; and capital indexed bonds, in which the coupon is tied to an index of inflation.

Most of the bonds issued by the RBI and government have a minimum investment limit of Rs1,000 unless otherwise specified.