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Definition: Savings Bond
Savings Bond is a type of bond which is purchased on the savings account (Payroll Account). These bonds can be availed with the help of the employers and the amount is directly deducted from the payroll of the employee. There are generally two types of Savings bonds, Series EE and Series I bonds, Series I bonds are purchased at their face value whereas Series EE bond can be purchased at half of its face value. Please find below the various advantages of a Savings Bond,
• Interest earned on these bonds are exempted from State Income tax but not from Federal Income Tax. However, it can be exempted from Federal Income tax if the amount of interest earned is used to pay educational expenses of the beneficiary.
• These bonds earn interest for a very long period of time (up to 30 years), as the beneficiary will be employed until his retirement.