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Home / Saving Schemes

Relief Bonds

Relief Bonds were once the most attractive investment avenue since they offered freedom from income tax, wealth tax and gift tax. Originally introduced in December 1987 by our government in a bid to fight the then prevalent and unprecedented drought conditions.

But then last year, the finance ministry reduced the interest rate from 10 percent to 9 percent, abolished wealth tax on productive assets and gift tax completely.

There is no upper limit on investments, which can be made in multiples of Rs.1,000/- while the maturity period for Relief Bonds lasts for 5 years. All RBI branches and a few designated branches of SBI accept the deposits.

Since they are easily transferable, most individuals use them to raise loans from banks and financial organisations. Investors have a choice of availing either annual or cumulative interest. In case of the investor opts for the annual mode, he will receive 10 postdated interest cheques along with his bond papers.

Under the Deposit Scheme for Retiring Government Employees, only retired central/ state government of public sector employees are allowed to open accounts, within 3 months of receiving retirement benefits. It is also open to retired judges of High courts and the Supreme court.

The deposits are made in multiples of Rs.1,000/- and shall not exceed payments made on retirement whether on superannuation or otherwise, including the following:

• Balance to the credit in government Provident Fund.
  
  
• Retirement/ Superannuation Gratuity.
  
  
• Commuted value of pension.
  
  
• Cash equivalent of leave.
  
  
• Savings elements of government Insurance Scheme.

Interest is calculated at 9 percent annually and payable on 30th June and 31st December. If authorised, the interest can be deposited by the bank in a separate savings account of the depositor at the same bank. Any interest that is due but not withdrawn will continue to earn interest.

The entire balance or a part in multiples of Rs.1000/- can be withdrawn after 3 years from the date of the initial deposit or last deposit. The interest on the amount so withdrawn is calculated at 4 percent from the date of deposit until the date of withdrawal. Any excess interest, if already paid, will be adjusted.

If the investor expires during the lock-in period of 3 years, the account shall be closed and the amount paid to the nominee. If the spouse is a joint holder or a sole nominee, the spouse can request for a continuance according to the terms and conditions applicable to the account.

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