Skip to main content

State Bank of India (SBI) Bonds have been listed on the National Stock Exchange

State Bank of India (SBI), India's largest lender, has come out with a Series 1 and Series 2 Lower Tier-II bonds having a face value of 10,000. Though the issue was closed on October 25, you can purchase it from the stock market as the bonds have been listed on the National Stock Exchange (NSE). Outlining the bank's plans, SBI chairman O.P. Bhatt said: "We intend to do more such issues, maybe, every quarter. We will create a secondary market for these issues so that exit becomes easy and price discovery takes place."

Company background

SBI's origin dates back to 1806. Today, it's India's largest bank, with more 12,500 branches. The lender has more than 140 international offices in over 30 countries. Its customer base was over 153 million as on 31 March 2010. The bank reported a consolidated net profit of Rs 3,365 crore for the period ending 30 June 2010, a rise of 22 per cent year-on-year.

Product features

  • Series 1 Lower Tier-II bonds will earn you an interest rate of 9.25 per cent, and have a tenure of 10 years;
  • The bank offers an interest of 9.50 per cent for the Series 2 Lower Tier-II bond. The tenure of these bonds would be 15 years;
  • Trading, of the bond will be in demat form;
  • The minimum investment is Rs 10,000 and further investments should be in multiples of Rs 10,000;
  • The interest on both would be paid out on 2 April every year;
  • The interest earned on these bonds is taxable. The amount would be added to the 'other income' of the investor in the financial year in which the interest was received. So, the tax would be according to the tax slab the investor falls under. Those in the 30 per cent bracket would get a post-tax yield of 6.5 per cent. For the 10 and 20 per cent tax bracket investors, the returns would be 8.3 and 7.4 per cent, respectively.

Advantages

  • The interest is attractive compared to the annual interest rate of 7.75 per cent offered by SBI on its 8-10 year fixed deposits;
  • Five-year term deposits offered by banks can earn you 7-8 per cent with Section 80C benefits. Investors in the tax bracket of 20 per cent and above get a return of over 9 per cent on these deposits, which is still less than the return on SBI bonds. And even this is applicable only if they have not exhausted the Rs 1 lakh limit;  
  • The bonds do not attract any tax deducted at source (TDS);
  • They have high liquidity as they have been listed;
  • The bond issue was assigned AAA rating by CARE, indicating highest safety;
  • The bonds have a call option. The Series 1 bonds would be called after five years and Series 2 bonds after 10 years. If SBI does not buy back the bonds, investors get an additional 0.50 per cent interest on the bonds.

Points to note

  •  The bonds do not provide any deduction under the I-T Act;
  •  Unlike bank deposits, they aren't covered by deposit insurance;
  •  They cannot be used as collateral for any loans; and
  •  They will attract capital gains tax when sold in the secondary market.

Popular posts from this blog

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...

Mirae Asset Emerging Bluechip Fund

Start Saving for Tax 2018 by Investing in ELSS Funds Online HOW HAS THE Mirae Asset Emerging Bluechip Fund PERFORMED?   With a 7-year return of 25.08%, the fund has outperformed both the category average return (18.04%) and benchmark (13.4%) by a wide margin.   Growth of Rs 10,000 vis-a-vis category and benchmark   Mirae Asset Emerging Bluechip Fund   is a mid-cap oriented fund continues its stellar run, clocking another year of outperformance over benchmark and peers—a feat it has achieved every year since inception. The fund manager plies a strictly bottom-up approach to stock selection and keeps risk contained by focusing on larger mid-caps. A year ago, it had stopped accepting lump sum investments and now the fund has also put restrictions on SIP investments—only allowing SIP on the tenth of every month with an upper limit of Rs 25,000.   It has done so to preserve its return profile in the face of mounting inflows and stretched valuations in the mid-cap space. This step should hel...

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...

Section 80CCD

Top SIP Funds Online   Income tax deduction under section 80CCD Under Income Tax, TaxPayers have the benefit of claiming several deductions. Out of the deduction avenues, Section 80CCD provides t axpayer deductions against investments made in specific sector s. Under Section 80CCD, an assessee is eligible to claim deductions against the contributions made to the National Pension Scheme or Atal Pension Yojana. Contributions made by an employer to National Pension Scheme are also eligible for deductions under the provisions of Section 80 CCD. In this article, we will take a look at the primary features of this section, the terms and conditions for claiming deductions, the eligibility to claim such deductions, and some of the commonly asked questions in this regard. There are two parts of Section 80CCD. Subsection 1 of this section refers to tax deductions for all assesses who are central government or state government employees, or self-employed or employed by any other employers. In...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now