MINISTRY OF FINANCE
(Department of Economic Affairs)
New Delhi, the 26th June, 2020
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 Rs. 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.
(i) Subscription to the bonds will be in the form of cash (upto ` 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.
(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.
(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.
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 sole holder/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 O ffice 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
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 ha ve 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.
(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.
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.
[F. No. 4(10)-B(W&M)/2020]
By Order of the President of Indias
RAJAT KUMAR MISHRA, Jt. Secy. (Budget)