Retail investors can open a Retail Direct Gilt (RDG) account with RBI to buy government bonds. These bonds are government securities G-Sec.
It is issued by the central government and state governments. The State Governments issue it in the form of State Development Loan and the Central Government issues it in the form of Gold Bond.
Gold bond prices are linked to gold prices. You can keep these bonds in deposits till maturity and earn interest from time to time. If investors want, they can also sell the bond before maturity. These bonds are issued by the central and state governments, so the risk is very less.
The account for this scheme has to be opened through a portal of RBI. For this, an OTP is sent to the investor’s mobile number or email.
The investor should have an account in any bank for this. To open an account, it is necessary for him to have a PAN number. Also, must have a valid document such as driving license, voter ID card or Aadhaar. NRIs can also invest in this bond. Those who want to invest in bonds can pay through net banking or UPI.
There is no tax benefit on government bonds. The way tax exemption facility is available on small savings schemes such as Public Provident Fund or NPS, the same facility will not be available on government bonds. The interest earned on government bonds will be taxed as per the slab.
If you buy such bonds through mutual funds, then you may have to pay more tax. Interest earned from bonds and mutual funds will be added and taxed accordingly. However, until it is redeemed, no tax will be levied.
Bonds up to Rs 5 crore can be bought through this system of RBI. Bonds for less than this can also be bought. In this segment, the Reserve Bank has fixed a limit of Rs 10,000 for retail investors, the rate at which the minimum bond can be bought. This RBI bond can be sold before maturity.