5.1 There are two varieties of public sector undertaking (PSU) bonds, namely taxable
bonds and tax free bonds. A PSU may issue tax-free bonds with the prior
approval of the Ministry of Finance.
5.2 The features of PSU bonds are (a) no deduction of tax at source on the interest (b)
easily transferable by endorsement (c) no stamp duty on transfer (d) tradable on
stock exchanges.
- Indira Vikas Patras (IVP):
6.1 The features of IVP are that:
It doubles in five and half years. Therefore an IVP is one-half of its face
value. That means the compound interest on an IVP is 13.43 percent per
annum. There is however, no income tax benefit for tax purposes. VIPs
are bearer bonds. They are transferable by mere delivery.- Kisan Vikas Patras :
7 .2 The features of KVPS are as follows:-
The maturity period is of five and a half years. Twice the amount is paid
on maturity. Premature encashment facility is available after two and a
half years.- Government Securities
8.1 Debt securities issued by the Government are referred to as gilt-edged securities.
Three types of instruments are issued:
- An investment that resembles a company debenture.
- A promissory note
- A bearer security
8.2 The maturity period ranges from 3-20 years and interest rates vary from each
other.
- Money Market Instruments:
9.1 Money market instrument is a debt instrument with a short maturity period. For
example, treasury bills, commercial paper, and certificates of deposit:
Treasury Bills: A Treasury bill issued by the Government has a maturity period
of six months or one year issued at a discount and is repayable at par.