Investors can avail of rebate under Section 88 of the Income Tax Act, 1961 by investing in this Bond.
The proceeds from this Bond shall be deployed towards infrastructure projects in accordance with the Income-tax Rules.
The Central Board of Direct Taxes (CBDT), Department of Revenue, Ministry of Finance, Government of India has vide its letter F.NO.178/57/2000-IT(AI) dated August 17, 2000 declared the Tax Saving Bond as eligible security for the purpose of clause (xvi) of sub-section (2) ofSection 88 of the Income-tax Act, 1961. The tax rebate under Section 88 can be availed of by NRIs provided NRIs opt not to be assessed under the Special Provision(s) of Chapter XII-A of the Income-tax Act, 1961.
The investors can choose either/both of the following options in respect of Tax Saving Bond:
| Option | I | II |
|---|---|---|
| Tax Benefit under Sec | 88 | 88 |
| Issue Price(Rs.) | 5,000/- | 5,000/- |
| Face Value(Rs.) | 5,000/- | 7,000/- |
| Tenure | 3 years | 3 years 4 months |
| Interest(%) (p.a.)* | 10.50 | DDB@ (YTM 10.6%) |
| Interest Payable | Annually | DDB@ |
| Minimum Application | 1 Bond | 1 Bond |
| Yield to Investor(%)*#% (Including Tax Benefits) |
21.7 | 19.7 |
@ Tax Saving Bond Option II is in the nature of Deep Discount Bond (DDB), hence no periodic interest is payable.
* Subject to TDS as per the then prevailing tax laws.
# It has been assumed that a surcharge of 15% of tax is payable in case of boththe options.
% Rounded off to nearest multiple of 0.1
Tax Benefits under Option I (Annual Interest)
— Please refer points 1, 4, 5 & 6 & 7of II A of the Tax Benefits on page 24.
— For NRIs, refer points 1 to 7,10 & 11 of II B of the Tax Benefits.
— For other eligible institutions, refer points 1 and 2 of II C of theTax Benefits.
Tax Benefits under Option II (in the nature of Deep Discount Bond)
— Please refer points 1, 2, 4, 5 & 6 & 7 of II A of the Tax Benefits
— For NRIs, refer points 1 to 8,10 & 11 of II B of the Tax Benefits
— For other eligible institutions, refer points 1 and 2 of II C of the Tax Benefits.
Face Value : Rs. 5,000/-
Redemption : At Face Value, i.e., Rs. 5,000/
The investors can choose any/all of the following options in respect of payment of interest.
| Option | I | II |
|---|---|---|
| Issue Price (Rs.) | 5,000/- | 5,000/- |
| Tenure | 3 years 10 months |
6 Years 6 months |
| Face Value (Rs.) | 7,475/- | 10,000/- |
| Minimum Application | 1 Bond> | 1 Bond |
| Yield to Investor (%)*# | 11.1 | 11.3 |
* Subject to TDS as per the then prevailing tax laws.
# Rounded off to the nearest multiple of 0.1.
For Tax Benefits :
— Please refer points 1,2,4,6 & 7of II A of the Tax Benefits (see overleaf).
— For NRIs, refer points 1 to 8 of II B of the Tax Benefits.
— For other eligible institutions, refer points 1 and 2 of II C of the Tax Benefits.
Money Multiplier Bond(in the nature of Deep Discount Bond)
The investors can choose either/both of the following options:
| Option | I | II |
|---|---|---|
| Issue Price (Rs.) | 5,000/- | 5,000/- |
| Tenure | 3 years 10 months |
6 years 6 months |
| Face Value (Rs.) | 7,475/- | 10,000/- |
| Minimum Application | 1 Bond | 1 Bond |
| Yield to Investor(%)*# | 11.1 | 11.3 |
* Subject to TDS as per the then prevailing tax laws.
# Rounded off to the nearest multiple of 0.1.
For Tax Benefits :
— Please refer points 1,2,4,6 & 7of II A of the Tax Benefits (see overleaf).
— For NRIs, refer points 1 to 8 of II B of the Tax Benefits.
— For other eligible institutions, refer points 1 and 2 of II C of the Tax Benefits.
Children Growth Bond(in the nature of Deep Discount Bond)
This Bond has been designed to provide for the lumpsum expenditure requirements once the child has grown up for events
such as the child's wedding, higher education etc. The investors can choose either/both of the following options (as per the table below) in respect of the
Children Growth Bond:
| Option | I | II |
|---|---|---|
| Issue Price (Rs.) | 5,000/- | 5,000/- |
| Tenure | 3 years 10 months |
3 years 10 months |
| Face Value (Rs.) | 30,000/- | 40,000/- |
| Minimum Application | 1 Bond | 1 Bond |
| Yield to Investor(%)*# | 11.3 | 11.3 |
* Subject to TDS as per the then prevailing tax laws.
# Rounded off to the nearest multiple of 0.1.
For Tax Benefits :
— Please refer points 1,2,4,6 & 7of II A of the Tax Benefits (see overleaf).
— For NRIs, refer points 1 to 8 & 10 of II B of the Tax Benefits.
— For other eligible institutions, refer points 1 and 2 of II C of the Tax Benefits.
The monthly pension would comprise interest and principal repayments in form of Annuity. There shall be no repayment of lumpsum principal at the time of maturity of the Bond.
| Option | I | II | III |
|---|---|---|---|
| Issue Price (Rs.) | 5,000/- | 5,000/- | 5,000/- |
| Minimum Application | 4 Bonds | 4 Bonds | 4 Bonds |
| Tenure | 11 years | 15 years | 18 years |
| Wait Period | 1year | 5 years | 8 years |
| Pension Period | 10 years | 10 years | 10 years |
| Pension per bond (Rs.)*@ | 73 | 110 | 150 |
| Pension per set of 4 Bonds (Rs.)*@ | 292 | 440 | 600 |
| Yield to Investor(%)*# | 10.5 | 10.6 | 10.7 |
| Frequency of pension payment | Monthly | Monthly | Monthly |
* Interest component subject to TDS as per the then prevailing tax laws.
@ Includes part principal repaid. For break-up, please see the table on “Break-up of Interest and Principal in each Pension Payment per Bond” below.
# Rounded of to the nearest multiple of 0.1.
Break-up of Interest and Principal component in each Pension Payment per Bond
| Option | I | II | III |
|---|---|---|---|
| Principal component till 2nd last pension payment (Rs.) | 41.50 | 41.50 | 41.50 |
| Interest component till 2nd last pension payment (Rs.)* | 31.50 | 68.50 | 108.50 |
| Total pension till 2nd last pension payment (Rs.) | 73.00 | 110.00 | 150.00 |
| Principal component for last pension payment (Rs.) | 61.50 | 61.50 | 61.50 |
| Interest component for last pension payment (Rs.) * | 11.50 | 48.50 | 88.50 |
| Total pension for last pension payment(Rs.) | 73.00 | 110.00 | 150.00 |
* Subject to TDS as per the then prevailing tax laws.
Taxation
No interest accrues during the wait period and hence no tax liability arises during that period. Only the interest portion of the pension payment is taxable, therefore tax deduction at source, if any, shall also be made on this portion only.
For Tax Benefits :
— Please refer points 1, 3, 4, 6 & 7 of II A of the Tax Benefits (see overleaf).
— For NRIs, refer points 1 to 7, 9 & 10 of II B of the Tax Benefits.
— For other eligible institutions, refer points 1 and 2 of II C of the Tax Benefits.
Regular Income Bond and Money Multiplier Bond - Preference in allotment, up to 70 percent of the Issue size after allotment of Tax Saving Bond, for applications for up to a total of 50 Bonds (not including Tax Saving Bond) by Individuals, Minors and Kartas of HUFs.
- Regular Income Bond and Money Multiplier Bond - Preference in allotment, up to 67 percent of the balance of the issue size, after allotment of Tax Saving Bond and preferential allotment as above, for applications by Private/Public/Religious/Charitable trusts and any other investors requiring approved security status for making investments.
