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The Easiest Way To Save Your Tax Refund

05 Jan 2023

Tax money often goes hand in hand with savings bonds. As a taxpayer, you have most likely been looking forward to the tax refund and begun planning for it as soon as you submitted your return. While some may be eager to spend it, others may prefer saving it. If you are looking for the easiest way to save your tax refund, read on.

Why Buy Savings Bonds?

Generally, it is a smart move to save your tax refund and even a modest amount can act as a cushion during financial emergencies.

Unlike unpredictable investments like shares in the stock market, government savings bonds are very reliable and one of the most preferred investment options.

Savings bonds are a dependable choice and offer a 7.75% interest rate on the amount you invest. Resident individuals in India and Hindu Undivided Families are eligible to invest. Before you buy savings bonds, here are five features you should know:

1.Savings Bonds are guaranteed by the Government of India:
The Government of India is obligated to return the investment amount on maturity to the investor. Thus, savings bonds have a sovereign guarantee, making them a safe option.

2. The interest on Savings Bonds is taxable:
It is important to note that savings bonds are not tax-free. Like several other small savings investments, the interest earned on the amount invested in a savings bond is taxable. The pay-out interest is taxed at normal tax rates on being added to the person’s taxable income. Savings bonds investments are subject to Tax Deducted at Source (TDS) regulations, and the specifications of the Income-tax Act, 1961.

3. There is no maximum investment limit for Savings Bonds:
There is a minimum investment requirement for a savings bond of Rs. 1,000, which can be increased in multiples of the same. However, there is no maximum limit, and you can invest any amount you wish to at any time until the subscriptions are closed.  

4. There are 2 options for interest on Savings Bonds:
The two options are cumulative and non-cumulative. The interest is paid out on maturity under the cumulative option. The cumulative maturity amount for an initial investment of Rs.1,000 is Rs.1,703. As for the non-cumulative option, the interest will be paid out to the investor’s bank account every six months.

5. Premature withdrawal is dependent on the age factor:

Premature withdrawal of your savings may be allowed depending on the age of the investor. The lock-in period for senior citizens (between 60 to 70 years of age)is six years. Meanwhile, the lock period for investors between 70 to 80 years of age, is five years and for those above 80 years, the period is four years. After this lock-in period has elapsed, you will be able to withdraw the money you invested.


The reason why tax savings bonds are the safest way to save your tax refund is because it is impossible to lose the investment unless the national government ceases to exist. These bonds are secured by the “full faith and credit” of the government.1

As of July 1st 2020, the Indian Government has announced Floating Rate Savings Bonds. You can buy savings bonds online now and choose from a variety of them.

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