These Government bonds would give @ 6.8% interest rate for next 40 years
Government Securities Bonds of 2060 (re-issue) would open for subscription on 8th December, 2020. Retail investors can invest in such bonds to get guaranteed fixed income for long term of 40 years. The majority of banks would issue fixed deposit for 10 years. Some banks would issue for beyond 10 years with a specific rate of interest. G-Sec bonds are issued for long term of 40 years with a fixed rate of interest, hence investors might get tempted to invest in such schemes. Should you invest in Government Securities Bonds of 2060 that is being issued now in December, 2020?
6.8% Government Securities Bonds of 2060 [Dec-20 issue details]
Bidding would start on 8th December, 2020
Bidding would end on 10th December, 2020
RBI would auction these bonds on 11th December, 2020
RBI would settle for successful bidders by 14th December, 2020
Issue size is Rs 6,000 Crores
The symbol for this issue is 680GS2060F. Security name is 6.8% GS 2060 and ISIN number is IN0020200187
If in auction, RBI allots you these bonds, you would get these bonds in your demat account.
These bonds have a maturity period of 40 years.
There is no need to show a life certificate (the way we have for pension schemes) in this scheme to get interest every year.
The face value of the bond is Rs 100.
The bidding price is Rs 107 per bond.
Interest payable is 6.8% per annum on face value of the bond. Such interest received from G-Sec bonds are taxable. One needs to show them as income from other sources and pay income tax as per income tax slab applicable to them.
At maturity the principal amount of Rs 100 per bond would be paid back to investor / nominee.
Retail investors can invest minimum of Rs 10,000 and maximum of Rs 2 Crores.
More information can be obtained at this NSE link.
How to invest in these G-Sec bonds of 2060?
One can purchase them at NSEGOBid platform of NSE.
Step-1: Login to NSEGoBid platform
If you do not have an account yet, you can sign up. Use the same above link for new users sign-up
Step-2: Select T-Bill/Bond available for subscription
Step-3: Make Online Payment from Bank Account Linked to Demat Account
Step-4: Receive Bonds directly in your Demat Account. In case of non allotment, you would get a refund to your demat linked bank account.
How can we sell these G-Sec Bonds?
These bonds would have a maturity period of 40 years and maturity amount would be paid back to demat linked bank account. However, if one wants to sell these bonds before maturity, you should check with your demat account broker. Your demat account broker should provide the option on their platform to sell your G-Sec bonds. If there are buyers and price matched (buyer agreeing to buy at a price which seller is willing to sell) then one can sell them. Otherwise, one can consider these as non liquid investments.
Reasons to invest in G-Sec Bonds of 2060 [6.8% GS 2060]
1) Investors can get a fixed interest of 6.8% if the allotment happens at Rs 107 per bond.
2) Investors can lock their money for long term of 40 years and get fixed income without worrying about declining interest rates.
3) Since these bonds are held in demat form, there is no TDS.
4) There is no default risk as these are issued by Govt of India.
Reasons NOT to invest in G-Sec Bonds of 2060 [6.8% GS 2060]
1) While you would bid for G-Sec bonds, due to heavy competition you might not get allotment.
2) These are G-Sec Bonds (which has low liquidity, but has a high maturity period of 40 years).There are better schemes like RBI Floating rate bonds.
3) The effective yield would be at 6.35% as the bond is available at a premium of Rs 107 and not Rs 100 (6.8% / 107 x 100).
4) Future G-Sec bonds can have higher interest rates.
5) There are better investment options that can provide higher returns in the long term of 40 years.
Alternatives to G-Sec Bonds of 2060 [6.8% GS 2060]
This is not a comprehensive list, but can give an idea if you are looking for some alternative options.
1) Since the maturity period is 40 years, one can invest in Equity Mutual Funds.
2) If you are looking for fixed income, you can check for RBI floating rate bonds. RBI Floating rating bonds have a current interest rate of 7.15% – Tenure is 7 years
3) For investors who have their retirement age < 10 years can invest in debt mutual funds and some portion in equity funds. If you want to avoid mutual funds, go for bank fixed deposits and post office saving schemes. If you still look for more safety, consider taking LIC Jeevan Shanti as a worst case.
4) For investors who are at retirement age now can opt for SCSS, Bank FDs, PMVVY etc., If you are looking for safe fixed income, you can go for Jeevan Akshay VII Plan as a last resort.
Should you opt for G-Sec Bonds 2060 of Dec 2020 issue?
While one would be getting fixed income for 40 years at fixed interest rates (6.35%), one should ask themselves whether they are comfortable with such interest rates. If you invest in G-Sec bonds for 40 years, your money is blocked. Unless there are some buyers in the secondary market, you cannot sell them. In the long term of 40 years, there are plenty of options where one can play. If you are not happy, they can switch to better investment option. The decision would depend on your comfort zone.
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