With bank deposits offering low returns, bonds that offer better rates and have a sovereign guarantee can be good options. The 7.75% savings (taxable) bonds are one such option. Any individual or HUF can invest but NRIs can’t.
The face value of one bond is ₹100 and you need to buy at least 10 bonds at a time; there is no upper limit. The bonds, which have a maturity period of seven years, provide a return of 7.75% per annum. There are two interest payout options. In the non-cumulative option, interest is paid on a half-yearly basis. In the cumulative option, interest is paid at the end of the maturity period. The interest earned from these bonds is taxable in your hands.