Buy savings bonds? whatever it takes
October 3, 20246 Mins Read

Jumbangla Desk: The condition of the stock market is not promising. Bank deposits (FDRs) are also not performing as expected. As a result, savings is still the preferred investment name for many. Where money is 'safe', profits are high. So common people choose National Savings Bank for hassle free investment. There is a variation in the rate of profit between savings certificates in different schemes. But investors are more interested in schemes that offer higher returns.

savings account

There are currently 11 savings schemes running in the Directorate of National Savings. These include 4 Savings Certificates, 2 Post Office Savings Bank Accounts, 1 Prize Bond, 1 Postal Life Insurance and 3 Bonds for Expatriates. However, the rate of interest or profit is not the same against investments in all programs. Tax rates on interest vary.

There are four types of savings certificates in the country- 1. Five-year Bangladesh Savings Certificate; 2. Profit-Based Savings Certificates every three months; 3. Family savings certificate and 4. Pensioner Savings Certificate.

11 percent to 11.76 percent profit is being given on savings bonds at different rates. However, if you redeem before maturity, the profit will decrease.

Pensioner Savings Certificate

Tenure of pensioner savings certificate is 5 years. Among the savings bonds, pensioner savings bonds offer the highest returns. The rate of which is 11.76 percent. The pensioner's savings account benefits can be withdrawn on both monthly and quarterly basis. No tax is deducted at source on the profit earned against the investment of up to 5 lakh rupees in this savings certificate. Tax at source is 10 percent against investment profits in excess of this. There is an opportunity to invest a maximum of 50 lakh rupees in a single name.

Pensioner Savings Certificates can be purchased by – retired Government, Semi-Government, Autonomous, Semi-Autonomous Organization Officers/Employees, Retired Judges of Supreme Court, Retired Armed Forces and Family Pension Beneficiary Spouse, Spouse and Children of Deceased Servicemen.

Family savings certificate

More attractive to customers is the five-year 'Family Savings Card'. Most investments are made in these savings bonds. The government pays the highest profit for pensioners, but it is followed by family savings certificates. The profit at the end of the period is 11.52 percent. However, the annual profit is divided. For example, 9.50 at the end of the first year, 10.00 at the end of the second year, 10.50 at the end of the third year and 11.00 at the end of the fourth year. 960 profit per month on 1 lakh taka. Tax at source is 5 percent on profits against investments up to Tk 5 lakh, 10 percent on investment profits above that. A maximum of Tk 45 lakh can be invested in a single name. Apart from this, the profit of Family Savings Paper can be withdrawn in monthly installments.

Who can buy - Any Bangladeshi female above 18 years, any Bangladeshi physically challenged (male and female) and any Bangladeshi citizen (male and female) 65 or above.

Bangladesh Savings Paper for five years

The rate of profit on five-year Bangladesh Savings Paper is 11.28 percent. However, if you redeem before the maturity, the profit is 9.35% at the end of the 1st year, 9.80% at the end of the 2nd year, 10.25% at the end of the 3rd year and 10.75% at the end of the 4th year. 5 percent tax on profit at source against investment up to Tk 5 lakh in this savings certificate, 10 percent tax on profit at source on investment of more than that. Any Bangladeshi citizen can buy this savings card. 30 lakhs in single name and 60 lakhs in joint name can be invested. Five-year Bangladesh Savings Papers can only be purchased from the Savings Directorate.

3-Monthly Profit Based Savings Certificate

The rate of return on 3-month profit-based savings bonds is 11.04 percent. Citizens of any class can buy it. The term of this deposit is 3 years. However, if you redeem before maturity, some profit rates will be lower. For example, the rate of profit at the end of three years is 11.04%, at the end of two years it is 10.50% and at the end of one year it is 10%. Tax at source is 5 percent on investments up to Tk 5 lakh, tax at source is 10 percent if the investment is above that.

All Bangladeshi citizens of all classes and professions can buy. Educational Institution for Autistics/any other Autistic Aid Institution (whose savings certificate profits must be utilized for the support of Autistics) certified by the concerned District Social Services Office.

Expatriate Bonds

There are three bonds for expatriates. But the highest profit is in Wage Earner Development Bonds. Its profit rate is 12 percent. The five-year bond has an opportunity to withdraw profit every 6 months.

The US dollar investment bond has a maturity of three years. Its profit rate is 6.5 percent. There is another bond for expats, called US Dollar Premium Bonds. 7.5 percent profit is available on investment in this bond. However, the profits earned against investment in all three bonds are tax-free.

Apart from this, there is a chance to get a prize of up to 6 lakh rupees against the prize bond of 100 rupees. Draws are held every three months. Tax at source on this is 20 percent.

Post office savings

There are two schemes under Post Office Savings Bank. One is a general account, the other is a term account. Bangladeshi citizens of all classes and professions of the country can invest in these two schemes. Simple rate of profit is 7.5 percent in general accounting.

Term accounts for three years. The profit rate of this account is 11.28 percent. However, in case of redemption before completion of three years, profit is 10.20 percent for one year and 10.70 percent for two years. In both cases, the tax at source is 5 percent on interest earned against investments up to Tk 5 lakh, and 10 percent on investment profits above that.

There are two types of postal life insurance policies. One is lifetime and the other is term. Any citizen can avail 'Postal Life Insurance' policy at any post office. The policy has no upper limit. In case of whole life insurance, the annual bonus at the end of the term is 4 thousand 200 taka per lakh. And in the case of term insurance, a bonus of 3 thousand 300 taka is available per lakh per year. This bonus is tax free.

How to buy Savings Certificates

There are specific forms for buying all types of savings bonds. This form can be downloaded from the website (nationalsavings.gov.bd). To buy savings card, customers first have to fill this form, along with two copies of passport size photos of the customer and the nominee. Customer's photograph will be attested by First Class Government Officer. And the customer himself will verify the photo of the nominee.

Copy of national identity card of customer and nominee is mandatory while buying savings card. However, if the nominee is a minor, a copy of the birth certificate will be required. Along with this, a copy of customer's own bank account check will be required, in which account the customer's profit and original money will be automatically deposited, the number of that account should be given. Certificate of last appointing authority is required as an additional document for purchase of Pensioner Savings Certificate.

In recent times, the government has brought several changes in the investment and management of savings bonds. Because buying savings bonds is an investment to common people but it is a loan to the government. For this investors have to pay certain amount of profit. Therefore, the government has given various conditions in the savings certificate.

The conditions in the Savings Certificates include – Now, customers have to file a mandatory income tax return if they buy savings certificates above Rs 5 lakh. In July 2022, the central bank issued a circular stating that commercial banks should take necessary measures to properly comply with section 48 of the Finance Act, 2022 in the case of investment of more than five lakh rupees as savings certificates and post office savings banks. Apart from this, even if the deposit in the bank account exceeds 10 lakhs, the proof of return deposit must be given to the bank. Due to this, a class of customers are turning away from savings cards.

Besides, in the budget of the current financial year, tax identification number (TIN) has been made mandatory for buying postal savings of more than two lakh rupees. According to the new rules, savings bonds worth more than 50 lakh in single name and 1 crore in joint name cannot be purchased. If the customer is a pensioner, he can buy a savings certificate of Rs 1 crore in single name and Rs 1.5 crore in joint name.