RBI bonds are debt instruments issued by the Reserve Bank of India. They also are referred to as Relief Bonds. These are five-year instruments that can not be liquidated prior to the maturity date on the bond. As of 2010, the interest rate on RBI bonds is 8.5 percent interest. The Indian Tax Act of 1961 gives RBI bonds tax savings, making the fixed interest rate even more attractive. According to Sunilgandhi, the website of India Investment/Business and Taxation, only residents, non-resident Indians, and Hindu undivided families can invest in RBI bonds.
Call your bank or other local banks in India and ask if they are selling RBI bonds. Most commercial branches will have them.
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Go to a bank that is offering the RBI bonds and speak with a customer service representative. Fill out any paperwork to register the bond in your name or the name of a minor child. Provide the bank representative with proof of identification.
Pay for the bonds. The minimum bond purchase is 1,000 rupees.
Hold the bond for five years until it matures and receive tax-free earnings.