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6.5 p.c. tax-free bonds launched

By Our Special Correspondent

NEW DELHI MARCH 13. The 6.5 per cent tax-free savings bonds without any limit on investment will be opened to the public from March 24, the Finance Ministry announced today. The bond has been closed for subscription following the lowering of the interest rates announced as part of the budget announcement.

The bonds are open to investment by individuals, including joint holdings, and Hindu Undivided Families but non-resident Indians are not eligible for making investments in these bonds. The bonds will be issued for a minimum amount of Rs. 1,000 and in multiples thereof.

The bonds will have a maturity of five years carrying an interest rate of 6.5 per cent tax free per annum, payable half-yearly. The cumulative value of the bond (face value Rs. 1,000) will be Rs. 1,377 at the end of five years. The lock-in period is three years from the date of issue after which an investor can surrender the bond for redemption. However, 50 per cent of the interest due and payable for the last six months of the holding period will be recovered in such cases, both in respect of cumulative and non-cumulative bonds. The bonds will not be transferable, except by way of gift to relatives as defined in Section 6 of the Indian Companies Act, 1956. These are not tradable in the secondary market and not eligible as collateral for loans from banking institutions, non-banking financial companies or financial institutions. Nomination facility is also available. The bonds will also be exempt from wealth tax.

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