New Delhi, Sept. 5: The government today notified that tax-free bonds announced by finance minister Jaswant Singh to encourage savings, will be issued from October 1.
The bonds, which will carry an interest rate of 7 per cent, will be exempt from both income tax and wealth tax and will have a maturity of six years, the notification said.
There will be no ceiling on investment in these bonds, which are not tradeable in secondary markets.
They will be open to investment by individuals, including joint holdings and Hindu undivided families.
Non-resident Indians will not be eligible for making investments in these bonds, the notification said adding they would be issued till further notice.
The bonds, announcement for which was made by the finance minister on July 31, will be issued on a par and for a minimum amount of Rs 1,000 and its multiples, it said.
The cumulative value of Rs 1000 at the end of six years will be Rs 1,511, the notification said adding the tax-free bonds will be issued in both demat form and stock certificates.
The bonds issued in one form will, however, not be eligbile for conversion into the other form, the notification said adding they would be issued by the Reserve Bank of India.
The notification said the bonds will not be transferable except by way of gift to relatives as defined in the Companies Act.
They cannot be used as collateral for loans from banks, financial institutions and non-banking financial companies.
A sole holder or a sole surviving holder of the bond being an individual can make a nomination.
The government proposed to mop up Rs 8000-9000 crore from tax-free bonds and the RBI relief bonds which are also tax-free and carry an interest rate of 8 per cent but have an investment ceiling of Rs 2 lakh per annum.