Under the Retail Direct Scheme, small investors can now buy or sell government securities (G-Secs), or bonds, directly without having to go through an intermediary like a mutual fund. It is similar to placing funds in debt instruments such as fixed deposits in banks. However, the same tax rules apply to income from G-Secs. But, with the Government being the borrower, there is a sovereign guarantee for the funds and hence zero risk of default. Also, government securities may offer better interest rates than bank fixed deposits, depending on prevailing interest rate trends. For example, the latest yield on the benchmark 10-year government securities is 6.366%. India’s largest lender, State Bank of India, offers 5.4% on deposits of less than ₹2 crore for a tenure of five to 10 years. (Read More)
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