How To Invest In Government Bonds In India?
Government bonds in India are the bonds issued by the central government under the supervision of the Reserve Bank of India(RBI). Government bonds are issued to the public when the government of India has to start some project for the welfare of the citizens and is need of some finance. The issued bonds are sold to the public to raise up funds. The investors of the bonds will receive a regular or fixed interest rate and upon maturity the face value of the bonds will be paid to the investors.
Merits of Investing in Government Bonds in India
- Risk -Free
- Return benefits are good
- Liquidity of these bonds are trouble-free
- Investment portfolio gets diversified
- Offers Tax benefits
Demerits of Investing in Government Bonds in India
- Apart from GOI savings bond(7.75%) the interest earnings on other bonds are relatively lower
- Government bonds maturity tenure ranges from 5-40 years, it can lose relevancy over time
Where and how to invest in Government bonds in India?
Government bonds can be easily purchased through a mobile app or a web based application named ‘NSEgoBID’ of the National Stock Exchange (NSE).
Investors are recommended to visit a nearby bank or post office with all the necessary documents such as Demat account number, Aadhar card, PAN card, ID card, address poof, etc. at the time of submitting the application form. to finish the investors request a minimum time frame will be taken. Once the verification and all other processes are completed the investor will now receive a bond certificate in their name.
Who should invest in Government bonds in India?
Individual or individuals who seek a minimum risk factor in their overall investment portfolio while expecting a higher than average returns on their investments can allocate a specific portion of their collection on investment of government bonds as well. The government has taken several measures to certify that G-secs to obtain understanding and popularity amidst retail investors and simultaneously simplifying ways subscription for the retail investors.
What are the brokerage charges on Government bonds in India?
The Government imposes broker fees on the bonds issued to the investors. the brokerage charges on government bonds in India will be 6 paise per Rs 100 as per the RBI guidelines. The brokerage charges will be 6 rupees since the minimum value of investment is Rs 10000. Plus an 18% GST charges upon the overall brokerage pressed on the bond.
How Safe it it to invest in Government bonds in India?
It is absolutely safe to make investment on government bonds by the investors as all the principles and interest payments are guided and guaranteed by the government of India certifying no non-payments at all. In actual fact government bonds investment are much more safer than banks fixed deposit.
What are the types of Government Bonds in India?
The conglomerate types of government bonds in India are listed below:
These bonds comes with a fixed rate of interest which remains constant throughout possession of the investment disregard to the changes in the market rate.
Floating rate bonds (FRB’s)
These bonds are subject to periodic changes in its return rates where the interest rates is divided in two components of a base rate and a fixed lay out. This lay out remains constant throughout the maturity tenure of the bond.
Sovereign Gold Bonds
The Sovereign Gold Bonds are issued by the central government where in the investors can invest in gold for long run without the load of investing in physical gold. On these bonds the interest earned are also tax exempted.
Inflation Index bonds
This is a unique bond where in the principal and the interest earned are granted with inflation. These bonds are mainly issued for retail investors and are indexed according to the Consumer Price Index (CPI) or Wholesale Price Index (WPI). Inflation Index Bonds secure real return stem where these investments remains constant, by allowing investors to secure their portfolio against the inflation rates. Other variation of such inflation adjusted securities is Capital Indexed Bond where only the capital proportion of balance is granted with an inflation index.
Bonds with Call or Put Options
One of the demarcate feature of these bonds is that the issuer of these bonds has a chance to buy back (call option) these bonds or the investor has the right to sell (put option) the bonds to issuer. this transaction can only occur on the date of interest outlay.
Zero Coupon Bonds
These bonds don’t earn any form of interest. Earnings from Zero Coupon Bonds arrives from the difference in issuance price and redemption value. These bonds are created from existing securities and not issued through auction.
Various units trying to diversify their investment portfolio or are starting their ventures as investor can contemplate in investing in government bonds.