Government Securities sit at that end of the spectrum. A G-Sec is a direct obligation of the Government of India, issued and serviced by the sovereign itself, paying a stated coupon on a fixed schedule until principal is returned at maturity. That is a different credit position from a corporate bond, whose servicing depends on the issuer's own cash flows, and it is the reason G-Secs are treated as the reference point against which other rupee debt is priced.
This guide walks through eligibility, the regulations that govern NRI access, investment limits, taxation, and the steps involved - so you can decide whether G-Secs have a place in your portfolio.
Key Takeaways
- NRIs can invest in Fully Accessible Route (FAR)-eligible Government Securities with no investment ceiling, via NRE/NRO-linked accounts
- Access runs through the RBI Retail Direct Scheme or a SEBI-registered broker with an NRI demat account
- NRE-route interest is tax-free in India; NRO-route interest faces TDS, reducible via DTAA
- Sovereign Gold Bonds are off-limits for fresh NRI purchases
- RBI Floating Rate Savings Bonds remain resident-only, unavailable to NRIs
Can NRIs Invest in Government Securities in India?
Yes. NRIs can invest in Indian Government Securities, primarily through the Fully Accessible Route (FAR), introduced by the Reserve Bank of India and governed under the Foreign Exchange Management Act (FEMA), 1999.
Before April 2020, NRI access to G-Secs was tightly capped. That changed when the RBI issued its Fully Accessible Route circular on March 30, 2020, permitting any "person resident outside India" (including NRIs, OCIs, and FPIs) to invest in notified Central Government securities without restriction.
The Fully Accessible Route (FAR) Explained
FAR opened the door wide, but it is not a blanket pass to every G-Sec in existence.
- No investment ceiling on specified securities, unlike the General Route, which caps foreign holdings
- Applies only to securities the RBI has formally notified as "FAR-eligible"
- The route opened with specified Central Government issuances and the RBI has added to the list since; which securities carry the designation on any given day is set out in the RBI's own notifications
- Once a security is designated FAR-eligible, it stays that way until maturity
Eligibility is therefore a per-security question rather than a per-category one. Tenor alone does not settle FAR status, and the ISIN is what identifies a particular security in the RBI's notification or in the auction notice for the issue.
Legacy NRI Bonds vs Today's G-Sec Access
This shift toward broad FAR access also explains why dedicated "NRI Bonds" haven't existed as a standalone product for years. SBI's India Millennium Deposits programme in 2000 was one of the last named diaspora-bond offerings. In 2013, the RBI facilitated a similar diaspora mobilisation, but through FCNR(B) deposits rather than a fresh bond issue.
Today, there's no separate "NRI bond" scheme. The route to Indian sovereign debt runs through FAR-eligible G-Secs and, where FEMA permits, State Development Loans (SDLs).
Types of Government Securities & Schemes NRIs Can Invest In
The range here is wider than the phrase "government securities" suggests. What is accessible:
- Central Government dated securities - commonly issued at 5, 10 and 30-year tenures, with the RBI's issuance calendar extending further out, paying fixed coupons semi-annually
- Treasury Bills - 91, 182, and 364-day zero-coupon instruments, issued at a discount and redeemed at face value
- State Development Loans (SDLs) - State Government-issued dated securities, auctioned by the RBI, with half-yearly interest
- RBI Retail Direct Scheme - a government-backed portal where FEMA-eligible NRIs open a Retail Direct Gilt account and invest directly in G-Secs, T-Bills, and SDLs
- Capital gains bonds - issued by REC and NHAI, carrying a five-year lock-in on bonds issued after April 2018, and used to claim exemption on gains from a property sale; the current investment ceiling and eligibility conditions sit with the issuers and the Income Tax Department
- Bharat Bond ETF/FOF - indirect exposure to AAA-rated PSU debt, open to NRIs on repatriation or non-repatriation basis
One notable exclusion: Sovereign Gold Bonds (SGBs). Fresh SGB purchases are restricted to resident Indians. If you bought SGBs while a resident and later became an NRI, you can hold them to maturity - you simply can't buy new ones.
Yields on all of these are set at auction and move with each cycle, so a figure quoted in an article describes a position that has already changed. Auction results and the prevailing yield on central and state paper are published by the RBI and the Clearing Corporation of India, and those are the numbers an order is actually placed against.
Accounts & Step-by-Step Process to Invest
You can't invest from an overseas bank account. Every rupee must route through an NRE or NRO account maintained in India.
- NRE account - for repatriable investments; interest earned is tax-free in India
- NRO account - for income earned in India or non-repatriable funds; interest is taxable
Once you've chosen between an NRE or NRO account, two prerequisites are non-negotiable before any G-Sec purchase:
- A valid PAN card - required for both KYC and tax reporting
- Completed KYC - through your bank, broker, or the RBI Retail Direct portal directly
RBI Retail Direct vs Broker-Assisted Route
You have two practical paths into the market:
Option A - RBI Retail Direct Gilt account Open an account directly with the RBI's Retail Direct platform, link your NRE or NRO savings account, and complete PAN and KYC verification. Once verified, place bids in primary auctions or trade in the secondary market - no intermediary needed.
Option B - SEBI-registered broker Open an NRI trading and demat account with a SEBI-registered broker, linked to your NRE/NRO account. This suits investors who want broker research, easier reinvestment, or a single dashboard alongside other holdings.
The two routes differ in what they give access to rather than in quality. Retail Direct suits an investor comfortable placing their own auction bids; the broker route puts G-Sec holdings on the same statement as equity and mutual fund holdings.
Investment Limits & Taxation for NRI G-Sec Investments
FAR-eligible G-Secs carry no investment ceiling for NRIs. That's the single biggest differentiator from other restricted debt categories available to foreign investors.
One caveat: older or non-FAR government securities may still fall under general limits applicable to Foreign Portfolio Investors. Eligibility runs security by security, and the RBI notification for the relevant ISIN is what settles it.
Once eligibility is confirmed, the next question is how the returns get taxed.
How Interest Income Is Taxed
| Route | Tax Treatment |
|---|---|
| NRE | Tax-free in India, under the exemption for interest on an NRE account held by a person resident outside India |
| NRO | Taxable in your hands, with TDS deducted at source; a lower rate may apply under a Double Taxation Avoidance Agreement (DTAA) |
Capital Gains on G-Secs
| Holding Period | Gain Type | Tax Rate |
|---|---|---|
| Over 12 months | Long-term | 12.5% without indexation, for transfers on or after 23 July 2024 |
| 12 months or less | Short-term | Your applicable slab rate |
Rates and holding-period thresholds are as notified and are subject to amendment; the current position sits with the Income Tax Department.
DTAA Benefits and Repatriation
India has signed DTAAs with a wide network of countries, including the US, UK, Singapore, and UAE. Relief is not automatic: it depends on the provisions of the particular treaty and on documentation, primarily a Tax Residency Certificate (TRC) from your country of residence, along with Form 10F where applicable.
Repatriation rules differ sharply by account type:
| Account Type | Repatriation Rule |
|---|---|
| NRE-route investments | Fully repatriable, subject to standard account conditions |
| NRO-route proceeds | Capped at USD 1 million per financial year under the prevailing FEMA provisions, subject to tax clearance and documentation |
Benefits & Risks of Investing in G-Secs as an NRI
G-Secs prioritise stability over growth, so understanding that distinction matters before you allocate.
Benefits:
- A direct obligation of the sovereign, which is a different credit position from that of a corporate issuer
- Predictable semi-annual coupon income for cash-flow planning
- Genuine diversification against equity and currency volatility elsewhere in your portfolio
Risks:
- Currency depreciation: The rupee value received converts back into fewer units of your local currency if the rupee weakens
- Interest rate risk: Bond prices fall when rates rise, particularly for longer-tenure holdings
- Liquidity constraints: Benchmark issues trade actively, but longer or off-the-run securities can be harder to exit before maturity
G-Secs suit NRIs prioritising capital preservation and steady income over aggressive growth. They sit naturally as a core fixed-income holding rather than as the growth engine of a portfolio.
How Cambridge Wealth Helps NRIs Navigate Government Securities Investing
Choosing between a 10-year G-Sec, an SDL, and a Bharat Bond ETF isn't just about yield. Duration, repatriation needs, and tax residency all shift the answer for each investor.
Cambridge Wealth is an AMFI-registered Mutual Fund & SIF Distributor, ARN-172841, APMI Registration No.: APRN-01683. What it can do on a question like this is portfolio analysis: many investors already hold government paper indirectly through gilt and debt scheme categories, and that indirect exposure is not visible from a scheme statement read on its own. Seeing it alongside a direct holding is what shows whether an allocation is more concentrated in one kind of paper than intended. The NRI view of investing from abroad is here, and the income-oriented approach is here.
Every scheme considered for the research universe passes a documented 108-point research framework across 5,000+ Indian investment products, assessed on quantitative metrics and qualitative factors including structure, mandate, underlying holdings, liquidity and exit terms.
Taxation is where a cross-border position gets complicated, and three things determine it:
- FEMA treatment of the transaction and of the account it is routed through
- DTAA applicability, which turns on the treaty with your country of residence
- Documentation supporting a lower withholding rate, including the TRC and Form 10F
Computation and filing on any of those is your own chartered accountant's work.
Once you're invested, Cambridge Wealth's real-time portfolio tracking app gives you visibility into your holdings (net worth, invested value, and gain/loss) from wherever you're based.
Frequently Asked Questions
Does FEMA permit a non-resident to hold Indian sovereign debt?
Yes. FAR-eligible Government Securities and SDLs can be held through an NRE/NRO-linked demat account or an RBI Retail Direct Gilt account, under FEMA and the RBI's own regulations.
What are the investment limits for NRIs investing in government securities?
FAR-eligible G-Secs carry no investment ceiling for NRIs. Non-FAR securities may still face restrictions, and the RBI notification for the relevant ISIN is what settles which category a security falls into.
What government schemes can NRIs invest in?
NRIs can access Central and State G-Secs via FAR, the RBI Retail Direct Scheme, capital gains bonds issued by REC and NHAI, and indirectly through Bharat Bond ETFs.
Can NRIs invest in RBI Floating Rate Savings Bonds?
No. RBI Floating Rate Savings Bonds are reserved exclusively for resident Indians and eligible HUFs.
Is interest income from G-Secs taxable for NRIs?
Interest is tax-free when invested via an NRE account. When routed through an NRO account, it's taxable with TDS deducted, though DTAA relief may lower the rate where the treaty and the documentation support it.
Do NRIs need a demat account to invest in Indian G-Secs?
NRIs need either a demat account linked to an NRE/NRO bank account through a broker, or an RBI Retail Direct Gilt account opened directly with the RBI.
