Bond SIPs are the new buzz in the Indian investment scene! Suresh Darak from Bondbazaar discusses RBI's move to introduce SIPs in the bond market. Let's explore what this means for you and your investments.
Bond SIPs Explained
The Reserve Bank of India has launched SIPs in bonds, similar to equity or mutual fund SIPs. Investors can invest fixed amounts on specific dates, with treasury bills as the starting point. Treasury bills offer yields around 5.5%, better than savings accounts but not as high as liquid mutual funds. This is a game changer for those shy of risk.
Risk-Averse Investor's Choice
For investors with money idling in savings or current accounts (earning less than 3% or 0%), bond SIPs provide a better return. With over ₹80 lakh crore parked in such accounts, this presents a significant opportunity. This is because, Bond SIPs could be the way to go, especially when compared to the potential returns from other investment options.
How Bond SIPs Work
Bond SIPs operate like equity or mutual fund SIPs, where a fixed amount is invested on a set date. You select the treasury bill instrument, and the funds are debited from your account on the bidding day. The securities are then transferred to your Demat account. This disciplined approach aims to make investing simpler for everyone, from seasoned players to newbies.
Tax Implications Addressed
Interest income from bond SIPs is taxed according to your income tax slab. TDS is not deducted, which can simplify the process. This income gets added to your gross total income, and you pay tax as per your slab rate. It's like any other interest income. Keep in mind it is essential to consult a financial advisor for tailored advice.
Future Market Potential
While current treasury bill SIPs offer decent returns, the real excitement lies in future implementations for long-term government and corporate bonds. Imagine the potential for returns exceeding 8-12%! The RBI's initiative is a game-changer, paving the way for more diverse and lucrative investment opportunities for Indian investors. Now is the time to invest.
