As forecast by finance minister Jaswant Singh, the Indian Government will launch a new tax-free bond scheme 1st October 1 in an attempt to boost the household savings rate.
There will be no limit on purchases of the bonds, which will carry a 7% coupon and which will be open to investment by resident Indian individuals and Hindu undivided families. Interest on the new bonds will be exempt from income-tax and the capital value will be exempt from wealth tax. The bonds will be issued in both cumulative and non-cumulative forms., with a maturity of six years. The issue price will be Rs 1,000 for every bond with a nominal value of Rs 1,000.
The bonds will be issued both in demat (paperless bond ledger account) form
and in the form of stock certificates, but will not be tradable in the secondary
market and are not eligible as collateral for loans from banks and financial
institutions. The bonds are not transferable except by way of gift to relatives.
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