PUBLIC SECTOR BONDS - Working Capital Management

Both bonds existing and new government corporate bodies engaged in certain specified areas of communication and power and other sectors that government may notify any issue of bonds subject to guidelines issued by government.

The interest rate on the bonds is determined by the Ministry of Finance and can be cumulative or non-cumulative. The maximum annual rate of interest is fixed by the ministry. Post-dated interest coupons for half yearly payment of interest could be attached by the company with the bonds, the face value of the bonds which will be listed on the stock exchange. The bonds are normally redeemable after the expiry of seven years but not later than ten years. There is no deduction of tax from the interest which occurs to the investors in these bonds. The incomes by way of interest from these bonds are entitled to exemption. The transferee is expected to inform the company by registered post within a period of 60 days to avail of tax incentives.


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Working Capital Management Topics