What Are NRI Bonds?
NRIs can purchase NRI bonds in India, which are investments that yield a fixed interest rate. You pay money to the Indian government or companies that are linked to the government (PSUs) when you buy a bond. You receive a certain amount of interest and your original investment back when the loan is paid off (maturity). NRIs who desire a consistent income, protection for their money, and the capacity to plan for the long term might think about bonds.
The RBI lets NRIs acquire as many government bonds, treasury bills, and PSU bonds as they like through the Fully Accessible Route (FAR).
Are NRIs Allowed to Invest in Bonds in India?
Yes. NRIs can purchase a significant number of Indian bonds. Since 2020, the Fully Accessible Route (FAR) has made things easier. This method enables NRIs to purchase as many government bonds as they desire. However, NRIs cannot invest in every bond, as certain bonds are not open to NRIs
What are the Types of Bonds NRIs Can Invest In?
If you are an NRI, you can buy many different types of bonds in India. These bonds offer varied levels of risk, returns, and time lengths. The RBI can modify the rules from time to time, which may affect eligibility. NRIs can choose from 5-year, 10-year, and long-term bonds according to their investment preferences.
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RBI Bonds (Government of India Bonds)
The Reserve Bank of India issues RBI Bonds for NRIs, which are savings bonds backed by the Indian government. These bonds are designed to provide investors with a steady and stable source of income.
- They give NRIs a steady and stable source of income.
- Sovereign backing makes them very safe.
- Tenure depends on the bond issue in question.
- Interest rates are tied to government rates and fluctuate in response to various factors.
- NRIs can purchase them through official channels, but they must meet specific requirements.
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Dated Government Bonds (G-Secs) and Government Securities
The Government of India issues long-term, marketable bonds called Government Securities to finance its infrastructure and other needs. They are among the safest investments you can make in India.
- These bonds are relatively safe and provide returns that are easy to forecast.
- 5, 10, 15, 30, and even 40 years are standard lengths of time.
- Depending on the state of the market, yields usually fall between 6.5% and 7.5%.
- NRIs can acquire G-Secs on the RBI Retail Direct platform or in the secondary market.
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T-Bills, or Treasury Bills
The Government of India issues Treasury Bills as a means of borrowing money for a limited period. They are great for keeping extra money safe for a short time. They are on sale for less than their regular price.
- They are incredibly safe and can be turned into cash quickly.
- You can get it for 91, 182, or 364 days.
- Return is the difference between the face value and the amount you paid.
- NRIs can invest through RBI Retail Direct or a broker.
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State Development Loans (SDLs)
State Development Loans are bonds that state governments issue to fund development and infrastructure initiatives at the state level. They usually pay a little more than central government bonds do.
- They have a lower risk than G-Secs and give better returns.
- Usually given out for 3 to 10 years.
- SDLs usually pay 0.25% to 0.50% more than G-Secs.
- NRIs can acquire SDLs from either RBI Retail Direct or the secondary market.
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Public Sector Undertaking (PSU) Bonds
Companies owned by the government, such as NHAI, PFC, IRFC, and REC, issue PSU Bonds. They receive funding for large public sector and infrastructure projects. These bonds are safe and pay greater returns.
- They have substantial government support and pay higher interest than G-Secs.
- Most PSU bonds last between 5 and 15 years.
- Depending on the credit grade, yields typically range from 7% to 9%.
- They can buy them through brokers or NRI-enabled bond platforms.
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Capital Gain Bonds (Section 54EC)
Section 54EC Capital Gain Bonds are tax-saving bonds issued by certain government agencies that let investors save money on taxes when they sell property for a long time.
- They let you avoid paying long-term capital gains tax.
- They help you lawfully pay less tax once you sell property in India.
- There is a five-year lock-in term for these bonds.
- Most of the time, the interest rate is between 5% and 6%. NRIs can invest during the issue period, which is six months after the asset sale.
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Zero-Coupon Bonds
Zero-Coupon Bonds are sold for less than their face value and then paid back at face value. They don't pay interest regularly, but they do pay a lump sum when they mature. They are well-suited for investors who aim to generate long-term returns.
- They help organise your finances in the future when you know what your returns will be.
- The length of the bond varies depending on the issue.
- Yield is the difference between the issue price and the maturity value.
- You can get them through brokers or bond platforms that sell NRI-eligible bonds.
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Tax-Free Bonds (Municipal and Some PSU Tax Bonds)
Tax-free bonds pay interest on which you don't have to pay taxes in India. There are not many new issues, but people still trade older bonds. They push for long-term funding for infrastructure.
- Tax-free bonds in India give you tax-free income.
- Usually given out for extended periods, such as 10 to 15 years.
- The usual range for coupon rates is 5% to 6%.
- NRIs can buy them from brokers on the secondary market.
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Corporate & Infrastructure Bonds (Selected NRI-Eligible Ones)
Private or infrastructure companies issue these bonds. Under specific rules, NRIs can invest in some business and infrastructure bonds. They fund the growth of businesses and the development of infrastructure.
- They pay more interest than bonds backed by the government.
- Usually offered for terms of 5 to 15 years.
- Returns usually fall between 7% and 10%, although this depends on how much risk you take.
- NRIs can invest using bond platforms or brokers that have been approved.
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Sovereign Gold Bonds (SGBs)
Sovereign Gold Bonds were government bonds that were connected to gold. They were given out to lower the demand for physical gold.
- There will be no further new issuances after 2025.
- Earlier issues had fixed maturities.
- Returns depend on the price of gold and the interest rate.
- If NRIs are allowed, they can only hold or trade existing bonds.
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Bharat Bond and Bond ETFs (Indirect Exposure to Bonds)
With a single investment, bond ETFs give you access to a group of bonds. These Exchange-Traded Funds invest in bonds issued by the government and public sector entities.
- They are simple to buy, sell, and spread out.
- The structure of the ETF determines its duration.
- Returns depend on the bonds in the portfolio.
- NRIs can buy them using a demat account on the stock markets.
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Debentures / Non-Convertible Debentures (NCDs)
Companies issue debentures and NCDs as long-term loan instruments that do not turn into shares. They help businesses get money for a long time.
- They give you more money back if you're willing to take on more risk.
- Usually given out for five to ten years or more.
- Interest rates typically range from 8% to 12%.
- NRIs can invest through brokers or platforms that have been approved by the NRI.
Credit Ratings of NRI Bonds
Credit ratings indicate the likelihood that a bond or debenture will default on its interest and principal payments. The investment is safer the higher the rating. Before investing money in a Bond, an NRI should always verify the ratings from reputable agencies, such as CRISIL, ICRA, or CARE.
| Rating |
Safety Level |
Risk |
| AAA |
Highest |
Lowest |
| AA |
High |
Very Low |
| A |
Adequate |
Low |
| BBB |
Moderate |
Moderate |
| BB/B |
High default risk |
Avoid for safety |
Tip for NRIs: If you want safe returns, stick to AAA- and AA-rated bonds. This is especially true if you want to send money home or rely on steady interest income.
What are the Benefits of NRI Bonds?
Here are some of the benefits of bonds that NRIs can buy in India:
- Predictable Income: Bonds give fixed interest, so you know how much you will earn every year.
- Low Risk: Government and AAA-rated PSU bonds are generally considered safer than stocks.
- Different Time Options: You can choose between short-term options (such as T-Bills) and long-term options (like 10-year or 30-year G-Secs).
- Diversification: Bonds balance your portfolio if you already hold stocks or property.
How You Can Invest in NRI Bonds?
Here is a simple guide for NRIs to invest their money in a bond or security:
- Open Accounts: NRE (repatriable) or NRO (non-repatriable) and a demat/trading account.
- RBI Retail Direct: Use this portal for G-Secs, T-Bills and some SDLs.
- Bond Platforms / Brokers: Use GoldenPi, Dezerv or your broker for PSU, corporate and other NRI-eligible bonds.
- KYC & FATCA: Complete NRI KYC, PAN, overseas address, FATCA declaration.
- Monitor: Check coupon dates, maturity, and tax treatment.
How is Interest from NRI Bonds Taxed in India?
If you are a non-resident Indian (NRI) who is buying bonds in India, the tax rules depend on three things:
- The kind of bond
- The money made (interest or capital gains)
- The type of account used (NRE or NRO)
The tax rates on interest income and capital gains differ. The account you choose also affects repatriation.
| Bond Type |
How Interest Is Taxed |
TDS |
Simple Example (₹10 lakh) |
| Tax-Free Bonds (e.g., NTPC 5.6%) |
Fully exempt under Section 10(15) |
No |
₹56,000 interest received fully tax-free |
| Specified PSU Bonds (e.g., PFC/REC) |
Exempt under Section 10(15)(iv)(h) if listed |
No |
₹70,000 interest received fully tax-free |
| Government Bonds / T-Bills |
Taxable as per the slab |
30% + Cess |
TDS deducted on interest earned |
| Corporate Bonds (NRI-eligible) |
Fully taxable |
30% + Cess |
Interest taxed after TDS, DTAA relief possible |
Capital Gains Tax on NRI Bonds
If you sell a bond or redeem it before maturity, any profit you make is treated as capital gains. For NRIs, capital gains tax depends mainly on how long you hold the bond.
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Short-Term Capital Gains (STCG)
- If you hold a bond for less than 24 months, the gain is treated as short-term.
- This gain is added to your total income in India.
- The STCG tax is taxed according to the NRI income tax slab rates.
- A 30% TDS is usually deducted under Section 195 at the time of payment.
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Long-Term Capital Gains (LTCG)
- If you hold a bond for more than 24 months, the gain becomes long-term.
- From Budget 2025, LTCG on bonds is taxed at a flat 12.5%.
- Indexation benefit is not allowed.
- This rule now applies equally to residents, NRIs, and FPIs from AY 2026–27.
Important Points to Note for NRIs on Taxation:
- Bonds do not attract Securities Transaction Tax (STT).
- Because there is no STT, the ₹1 lakh tax-free LTCG exemption does not apply.
- TDS may still be deducted, and excess tax can be claimed back by filing an ITR.
Saving Capital Gains Tax Using 54EC Bonds
NRIs can save long-term capital gains tax from property sales by investing in 54EC bonds. If these conditions are met, the entire capital gain becomes tax-free:
- Investment limit: Up to ₹50 lakh
- Time limit: Within 6 months of selling the property
- Lock-in period: 5 years
- Eligible issuers: NHAI, REC
Repatriation Rules for NRI Bond Investments
Repatriation refers to transferring funds from India to your overseas bank account. This depends mainly on whether you invest through an NRE or NRO account.
| Account Type |
Can Principal Be Repatriated? |
Can Interest Be Repatriated? |
Annual Limit |
| NRE |
Yes, fully |
Yes, fully |
No limit |
| NRO |
Restricted |
Yes, after tax |
USD 1 million |
| FCNR |
Yes, fully |
Yes, fully |
No limit |
NOTE: For NRO repatriation above ₹5 lakh, Form 15CA and 15CB are required.
DTAA Benefits for NRIs
India has Double Taxation Avoidance Agreements (DTAA) with many countries.
- It reduces the tax deducted in India
- Prevents paying tax twice on the same income
- The common DTAA rate for US NRIs is around 15%
You can claim DTAA benefits by:
- Submit the Tax Residency Certificate (TRC).
- Filing the Indian ITR and claiming a refund if excess tax is deducted.
Compliance and Filing for Investments in NRI Bonds
An NRI must follow these compliances for their investments in bonds and securities:
- NRIs must file ITR-2 or ITR-3.
- The due date is usually 31 July.
- No wealth tax on bond investments.
- Form 15G/15H does not apply to NRIs.
Wrapping it Up
For NRIs in 2026, India offers a wide range of bond options: G-Secs, T-Bills, SDLs, PSU bonds, 54EC capital gain bonds, zero-coupon bonds, selected corporate/infrastructure bonds, bond ETFs, and legacy tax-free issues. Sovereign Gold Bonds are not available for new purchase in 2025. Use RBI Retail Direct for government paper and trusted bond platforms or brokers for PSU and corporate bonds. Check eligibility, ratings, tax rules, and RBI updates before you make a purchase.
FAQs
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What are NRI bonds?
NRI bonds are fixed-income debt instruments that Non-Resident Indians can purchase in India to earn regular interest and receive the invested amount back at maturity.
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How do NRIs buy NRI bonds?
NRIs can buy NRI bonds through an NRE/NRO account linked to a demat account. Use RBI Retail Direct for government bonds or brokers/online platforms for PSU and other eligible bonds
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Can NRI bonds be repatriated by NRIs?
Yes, NRIs can freely repatriate proceeds from NRI bonds held in an NRE account, while repatriation from NRO accounts is subject to limits and specific documentation requirements.
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What is the risk level of NRI bonds?
Most NRI bonds, especially those issued by the Government of India and AAA-rated PSUs, carry a low risk. However, risk increases with lower credit-rated corporate bonds.
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