RBI Bonds 2021 vs Tax Saving Fixed Deposits vs Sovereign Gold Bonds
RBI Bonds vs FD vs SGB – Which is Better for Investment in 2021?
Tax Saving Bank Fixed Deposits (FD) are the traditional investment vehicle for most Indian households.
According to a recent RBI report approximate 50% of household financial assets in India are in FDs.
Let’s come to the point. If you are planning to invest this year, and are looking for no-risk avenues, then RBI Bonds and fixed deposits are good options to consider.
In addition, you can also consider Sovereign Gold Bond. However, while some people might argue that gold bond is a low risk investment since its gold’s price can drop or rise due to external parameters.
So, which one should you opt for? How do you choose between the three – RBI Bonds vs FD vs SGB?
Here are some points that can help you make the decision.
Let us start with the common features of these three scheme:
|Who can invest?|| 1– 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
2– A Hindu Undivided Family
|Where to buy?||Through banks (Online/Offline).|
|Payment||Payment can be made through cash or cheques or demand draft or electronic fund transfer.|
RBI Bonds vs FD vs SGB
|Parameter||RBI Bonds||Tax Saving FD||SGB|
|Maturity period||7 years||5 years||8 Years.|
|Interest rate||7.15%||4.50% – 6.75%||The return from SGBs are in terms of interest and capital appreciation. Investors get a fixed interest rate of 2.5% per annum.|
Furthermore, it is over and above the gold price return.
|Minimum Investment||INR 1000/-||INR 1000/-||1gm/fincly Year|
|Minimum Investment||No maximum limit||1.5L||Maximum of 4kgs wherein for trusts and similar entities max ceiling is 20kgs.|
|Tax benefit on investment||No tax benefit on investment||Investments up to Rs. 1.5 lakh deductible from taxable income under Section 80C.||No tax benefit on investment|
|Tax treatment of interest||Interest is added to income and taxed according to your slab||Interest is added to income and taxed according to income slab||TDS is not applicable|
|Calculation of interest||Half-yearly compounded basis||Cumulative, on maturity||SGB offers 2.50% fixed interest rate per annum.|
|Interest payments||Cumulative or non-cumulative (payable half-yearly)||Cumulative, on maturity||non-cumulative (payable half-yearly)|
|Loan facility||Not eligible for collateral||Can be used as collateral||Yes|
|Risk Factor||No Risk||No Risk||Low Risk|
|Premature withdrawal||Premature redemption shall be allowed for specified categories of senior citizens only.||No||Premature withdrawal is applicable only after 5th year onward on the coupon payment date and also tradeable if held in demat form.|
|Senior Citizen Benefit||They may take a premature exit after 4, 5 and 6 years based on age group.||Most of the banks provide FD rates to senior citizens at an extra rate of 0.25% – 1.00% (approx.).||NA|