Govt. notifies Floating Rate Savings Bonds 2020 (Taxable) – FRSB 2020 (T)

Govt. notifies Floating Rate Savings Bonds 2020 (Taxable) – FRSB 2020 (T)

(Department of Economic Affairs)


New Delhi, the 26th June, 2020

Floating Rate Savings Bonds,2020 (Taxable) –FRSB 2020 (T)

S.O. 2123(E).—The Government of India, hereby notifies the issue of Floating Rate Savings Bonds, 2020 (Taxable); Short Name –FRSB, 2020(T)(“the Bonds”) with effect from July 1, 2020. The  terms  and  conditions  of the issue of the Bonds, shall be as follows:

2. Eligibility for Investment:

The Bonds may be held by –

(i)   a person resident in India,

(a) in her or his individual capacity, or

(b) in individual capacity on joint basis, or

(c) in individual capacity on any one or survivor basis, or

(d) on behalf of a minor as father/mother/legal guardian

(ii) a Hindu Undivided Family.

Provided  that  if  the  holder  of  the  bond  subsequently  becomes  Non-Resident  Indian  during  the  currency  of  the bond,  shall  continue  to  hold  the  Bonds  and  repatriability  of  interest/  maturity  proceeds  would  be  subject  to provisions of  FEMA guidelines.

Explanation: For the purposes of this paragraph, the “person resident in India” shall have the same meaning as defined in clause (v) of Section 2 of the Foreign Exchange Management Act 1999(42 of 1999).

3. Limit of Investment:

There will be no maximum limit for investment in the Bonds.

4. Tax Treatment:

Income-tax: Interest on the Bonds will be taxable under the Income-tax Act, 1961 as applicable according to the relevant tax status of the Bonds holder/s.

5. Issue Price:

(i)  The Bonds will be issued at par i.e. at `100.00.

(ii) The  Bonds  will  be  issued  for  a  minimum  amount  of Rs. 1,000/- (face  value)  and  in  multiples  thereof. Accordingly, the issue price will be Rs. 1,000/-for every Rs.1,000/-(Nominal) face value.

6. Subscription

(i) Subscription  to  the  bonds  will  be  in  the  form  of  cash  (upto Rs. 20,000/-only)/drafts/cheques  or  any electronic mode acceptable to the Receiving Office.

(ii) Cheques  or  drafts  should  be  drawn  in  favour  of  the  Receiving  Office,  specified  in  paragraph  10  below and payable at the place where the applications are tendered.

7. Date of Issue

The Bonds will be issued, in electronic form and credited to the Bond Ledger   Account (BLA) of the investor/s on the date of the tender of cash or the date of realization of draft/cheque/funds.

8. Form

(i) The  Bonds  will  be  issued  only  in  the  electronic  form  and  held  at  the  credit  of  the  holder  in  an  account called Bond Ledger Account (BLA), opened with the Receiving Office.

(ii) The  Bonds  issued  to  the  credit  of  BLA  of  an  investor  will  be  held  by  any  number  of  branches  of  the Receiving Offices, as authorised by Reserve Bank of India, as specified in paragraph 10 below.

(iii) A  certificate of holding as  specified  in Annexure-1 will be issued to the holder/s of Bonds in Form ‘A’ as a proof of subscription.

9. Application:

(i) Applications  for  the  Bonds,  either  in  physical  form  or  electronic  form  may  be  made  in  Form  ‘B’ attached here to as Annexure 2 or in any other form as near as there to stating clearly the amount, name and full address of the applicant/s.

(ii) Applications  should  be  accompanied  by  the  necessary  payment in the form of cash (up to Rs.  20,000/-)/ drafts/ cheques/ electronic credit, as indicated in paragraph 6 above.

(iii) Applicants  who  have obtained exemption  from  Income Tax  under  the  relevant provisions of  the Income Tax Act, 1961, shall make a declaration to that effect in the application (in Form ‘B’) and submit a true copy of the certificate obtained from Income Tax Authorities.

10. Receiving Offices

Applications for the Bonds will be received at:

(a) Any number of branches of State Bank of India,  Nationalised  Banks and four private sector banks, as specified in the Annexure 3.

(b) Any other entity as authorized by the Reserve Bank of India in this behalf from time to time.

11. Nomination:

Nomination  and  its  cancellation  shall be  made  in  Form ‘C’ and Form ‘D’ respectively, in accordance  with  the provisions  of  the  Government  Securities  Act,  2006  (38  of  2006)  and  the  Government  Securities  Regulation, 2007, published in Part III, Section 4 of the Gazette of India dated December 1, 2007.

(i) Accordingly,  a  sole  holder  or  all  the  joint  holders  (investors)  of  a  Bond,  being  individual/s,  may nominate in Form ‘C’ annexed to this Notification (Annexure 4) or as near there to as may be, one or more  persons  who  in  the  event  of  death  of  the  soleholder/all the  joint  holders,  as  the  case  may  be, would be entitled to the Bonds and to the payment due thereon.

(ii) Where the nomination has been made in favour of two or more nominees and either or any of them dies before such  payment  becomes  due,  the title  to  the Bonds shall vest  in  the  surviving nominee or nominees and the amount being due thereon shall be paid accordingly.

(iii) In the event of the nominee or nominees predeceasing the  holder(s), any nomination made as above shall become void. The holder(s) may make a fresh nomination.

(iv) The investor(s) can make separate nomination for each investment.

(v) No nomination shall be made in respect of the Bonds issued in the name of a minor.

(vi) A nomination made by a holder of Bond/s may be varied by  a fresh nomination, or as near there to as may be, or may be cancelled by giving notice in writing to the Receiving Office in Form D, annexed to the notification (Annexure 5)

(vii) Every nomination and every cancellation or variation  shall  be registered at the Receiving Office where the Bond is issued and shall be effective from the date of such registration.

(viii) Where the nominee is a minor, the sole holder or the joint holders, as the case may be, may appoint in a prescribed manner any person, in whom the bond would be deemed to have vested in the event of death of such holder or joint holders during minority of the nominee

12. Transferability:

The  Bonds  held  to  the  credit  of  Bond  Ledger  Account  (BLA)  of  an  investor  shall  not  be  transferable,except transfer to a nominee(s)/legal heir in case of death of the holder of the bonds.

13. Interest (Floating):

(i)The interest on the bonds will be payable at half yearly intervals from the date of issue in terms of paragraph 7 above,  upto  30th June/31st December as the case may be, and thereafter half-yearly for period ending 30th June/31st December on 1st July and 1st January respectively. The first interest payment will be released on Jan 01, 2021. There is no option to pay interest on cumulative basis.

(ii) The coupon/interest rate of the bond, would be re-set half  yearly (in sync with the coupon payment date) starting with Jan 1st, 2021 and thereafter every July 1st and Jan 1st and is linked/ pegged with prevailing National Saving Certificate (NSC) rate with a spread of (+) 35 bps over the respective NSC rate. Accordingly,  the coupon rate for first coupon period i.e. July 1 to  Dec. 31, 2020, payable on Jan. 01, 2021 is arrived at 7.15% (6.80%+0.35% = 7.15%). All subsequent coupon reset would be based on the fixation of rate of interest on NSC on Jan 01 and July 01 following the above methodology.

(iii) Interest  on  Bonds  held  to  the  credit  of  Bond  Ledger Account  of  an  investor  will  be  paid,  electronically by credit to the bank account of the holder as per details provided by the applicant.

14. Tax Deduction at Source

(i) Tax will be deducted at source while making payment of interest on the Bonds from time to time and credited to Government Account. Provided  that  tax  will  not  be  deducted  while  making  payment  of  interest/maturity  proceeds  as  the  case may  be,  to  individual/s  who  have  made a declaration  in  the application  form  that they  have  obtained  exemption from  tax  under  the  relevant  provisions  of  the  Income  Tax  Act,  1961  as  amended  from  time  to  time  and  have submitted a true copy of the certificate obtained from Income Tax Authorities.

15. Advances/Tradability against Bonds

The Bonds shall not be tradable in the secondary market and shall not be eligible as collateral for availing loans from banks, financial Institutions and Non-Banking Financial Companies.

16. Repayment

(i) The Bonds shall be repayable on the expiration of 7 (Seven) years from the date of issue.

(ii) Premature encashment in respect of the Bonds shall be allowed for individual investors in the age group of  60  years  and  above,  subject  to  submission  of  document  relating  to  date  of  birth  of  the  investor  in support  of  age  to  the  satisfaction  of  the  issuing  bank,  after  minimum  lock  in  period  from  the  date  of issue as indicated below:

(a) Lock  in period  for  investors  in  the age bracket of  60 to 70  years  shall be 6  years  from  the  date of issue.

(b) Lock  in period  for  investors  in  the age bracket of  70 to 80  years  shall be 5  years  from  the  date of issue.

(c) Lock  in  period  for  investors  in  the  age  of  80  years  and  above  shall  be  4  years  from  the  date  of issue.

(iii) In  case  of  joint  holders  or  more  than  two  holders  of  Bonds,  any  one  of  the  holders  shall  fulfill  the above conditions of eligibility.

(iv) After  aforesaid  minimum  lock  in  period  from  the  date  of  issue,  an  eligible  investor  can  surrender  the bonds at any time after the 12th, 10th and 8th half year corresponding to the respective lock in period but redemption payment  will  be  made on  the  following  interest payment  due date. Thus, the  effective date of  premature  encashment  for  eligible  investors  will  be  1st January  and  1st July  every  year.  However, 50% of interest due and payable for the last six months of the holding Period will be recovered in such cases.

17.  Brokerage:

Brokerage at the rate of 0.5% of the amount mobilized will be paid to the Receiving Offices, as listed in paragraph 10 above,  and they shall share at least 50% of  the brokerage so received  with brokers/sub brokers registered with them, on the applications tendered by them and bearing their stamp, on behalf of their clients.


By Order of the President of India


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