G-Secs, RBI bonds, gold bonds: which can an NRI buy, and which are off-limits?

Here is the confusing part first, cleared up. NRIs get turned away from some Indian fixed-income products and welcomed into others, and the pattern is not obvious. The government's own bonds are wide open to you. The two products a bank will most often push, the RBI savings bond and fresh gold bonds, are the ones you cannot buy.

The clean split: you can hold Indian government securities, treasury bills and state loans through a special route built for foreign investors. You can hold most corporate bonds and the capital-gains 54EC bonds through your NRO account. What you cannot buy are the RBI Floating Rate Savings Bond, which is reserved for residents, and fresh Sovereign Gold Bonds, which are closed to NRIs.

So before you are told "residents only" at a bank counter, know which side of the line each product sits on.

The best-kept secret for a conservative NRI is that Indian government debt is fully available to you. Through the Fully Accessible Route, opened in 2020, non-residents can hold specified government securities with no investment cap. In practice new issuances of the 5, 7 and 10-year government bonds, and the 10-year sovereign green bond, are on this route. Treasury bills and state development loans are also open to NRIs, though through the broader Retail Direct route rather than the Fully Accessible Route, so they do not carry the same free-repatriation treatment.

These are the safest rupee instruments there are, backed by the government, and for an NRI wanting steady rupee income or a rupee anchor in a global portfolio, they are the natural core. There is no special ceiling on how much you can hold.

Getting in is the only fiddly part. You can access these through the Reserve Bank's Retail Direct platform, which lets you buy government securities directly, provided you meet its account requirements: a PAN, an NRO account, and the mobile and verification setup it asks for. Many NRIs instead route the investment through their bank or a custodian, which handles the mechanics. The eligibility to hold the securities is clear; it is worth confirming the current account-opening steps with your bank, since the platform's onboarding for non-residents has been evolving.

Two products trip NRIs up precisely because they are so heavily marketed to residents.

The RBI Floating Rate Savings Bond, the popular high-interest government-backed savings bond, is for resident individuals only. As an NRI you are not eligible, whether you hold an NRE or an NRO account. If a relative or a bank suggests it, that is the wall you will hit.

Sovereign Gold Bonds are closed to NRIs for fresh purchases. The scheme is open to residents, so you cannot subscribe to a new issue as an NRI. The one exception runs the other way: if you bought Sovereign Gold Bonds while you were a resident and then moved abroad, you are allowed to hold them until early redemption or maturity. You just cannot buy more.

Knowing these two upfront saves the frustration of applying and being rejected, and points you to the routes that are actually open.

Beyond government paper, a good part of the corporate and special-bond market is open to you, on the right account.

Listed corporate bonds and non-convertible debentures can be held by NRIs, generally through your NRO account, within the limits FEMA sets for non-resident investment. Public-sector and infrastructure bonds sit here too. These carry more risk than government securities and more yield, so treat them as you would any credit exposure.

The 54EC capital-gains bonds, currently from REC, PFC and IRFC, are available to NRIs and matter for a specific reason: if you have a long-term capital gain from selling Indian property, parking it in these bonds within six months can exempt that gain from tax, up to a 50 lakh limit and in exchange for a five-year lock-in. That makes them less an income product than a tax tool, but a genuinely useful one for a property seller.

Older tax-free bonds no longer being issued can still be bought in the secondary market, where available, and their interest remains tax-free in your hands. They are scarce, but worth knowing about.

Two practical threads decide how well any of this works for you: the account and the tax.

The account sets your repatriation. Invest on a repatriable basis, funded from your NRE account or a fresh remittance, and both the money and the returns can go back abroad freely. Invest through your NRO account and the returns sit in NRO, from which you can repatriate up to a million US dollars a financial year with the usual certificates. Decide which you want before you buy, because it is set by how you fund the purchase.

The tax is simpler than people fear but real. Interest from bonds and government securities is taxable in India, and tax is usually deducted at source. The tax-free status people associate with an NRE account applies to the interest on the NRE deposit itself, not to bonds you buy, so do not assume a bond bought with NRE money is tax-free. Where a treaty gives a lower rate on interest, you claim it with your TRC and Form 41, formerly Form 10F. And any capital gain on selling a bond before maturity is taxed like other capital gains.