How NRIs Buy Indian Government Bonds: RBI Retail Direct, the Fully Accessible Route, and Why the 2026 Tax Cut Skipped You

You can now lend money straight to the Government of India, hold the IOU in your own name in a gilt account the central bank maintains for you, and pay nothing in brokerage or maintenance to do it, all from a flat in Dubai or a semi in Slough. The Reserve Bank's Retail Direct scheme opened that door to small investors in November 2021, and non-residents were folded in soon after. Layer on the Fully Accessible Route, which scrapped the ceilings that used to box out foreign money, and an NRI today has cleaner access to Indian sovereign debt than most resident Indians realise exists.

Then came June 5, 2026, when the headlines told you the government had exempted G-sec interest and capital gains from tax. Read the fine print and the relief lands on Foreign Institutional Investors and the Bank for International Settlements, the institutions sitting on roughly Rs 3.75 trillion of these bonds. It does not reach an individual NRI in a Retail Direct account. So the picture is genuinely good and genuinely more complicated than the news cycle suggested.

The 30-second answer: NRIs and OCIs eligible under FEMA can open a free RBI Retail Direct Gilt account and buy G-secs, T-bills and State Development Loans directly, with no brokerage and no ceiling on Fully Accessible Route securities. Fund from an NRE account for full repatriation, or NRO for non-repatriable holdings capped at USD 1 million a year. The June 5, 2026 tax exemption on G-sec interest and gains went to FIIs and the BIS, not to individual NRIs on the retail platform. For you, coupon interest stays taxable at slab rate, and secondary-market capital gains run 12.5% without indexation over 12 months, slab rate if less, with DTAA relief available. A long G-sec might yield around 7%, but after tax it usually trails a tax-free NRE FD paying 6.50% to 7.55%. Use the FD for parking, a long FAR G-sec for the anchor.

This guide assumes you already know what an NRE or NRO account is and what your residency status means; if not, start with NRE, NRO and FCNR accounts explained. What follows is the part that actually moves money: what you can and cannot buy, the funding choice that controls whether your capital ever comes home, why the 2026 exemption skipped you, and whether any of this beats the tax-free NRE deposit most NRIs default to.

The 2026 reforms were two doors, and only one opened for retail

Start with the thing the news ran together, because conflating the two pieces is where NRIs lose money. June 5, 2026 produced a coordinated package, and it had two distinct beneficiaries.

The first piece is the Income-tax (Amendment) Ordinance, 2026, gazetted on June 5 and effective for income on or after April 1, 2026. It exempts interest and capital gains on government securities in the hands of Foreign Institutional Investors and the Bank for International Settlements. Before it, listed G-sec long-term gains were taxed at 12.5% and interest attracted up to 20% for these investors, so the relief is real and large. It is also unambiguously institutional: it benefits SEBI-registered FPIs, the global asset managers, pension funds, insurers and sovereign wealth funds that hold their G-secs through FAR, and the BIS. There is no line in it for a retail NRI in an RDG account.

The second piece liberalised equities, not bonds, and it is the one that quietly applies to you. The government opened the Portfolio Investment Scheme to all individual Persons Resident Outside India, doubled the single-investor cap in a listed company from 5% to 10% of paid-up capital, and raised the aggregate overseas-individual limit from 10% to 24%. In money terms the per-investor headroom went from about Rs 25 crore to Rs 50 crore. That is a genuine win, but it sits on the equity side of your portfolio, governed by Section 115AD's capital-gains regime, not by anything to do with G-sec interest. Read capital gains tax for NRIs on shares and mutual funds for what that change does to your equity tax.

Hold those two apart. The bond tax break is for institutions. The equity access expansion is for individuals. Neither one makes your Retail Direct coupons tax-free, and a surprising amount of June 2026 commentary blurred exactly that.

What you can actually buy, and the two things you cannot

The platform sells the full menu of central and state government debt, but for an NRI four instruments matter and two hard exclusions catch people out.

Dated G-secs are the long bonds, with maturities now running out to 40 years after the June 2026 FAR expansion added 15, 30 and 40-year new issuances to the eligible list. They pay a fixed coupon, almost always twice a year, and return face value at maturity. A 30 or 40-year G-sec is the closest thing in rupees to locking a yield for a working lifetime, and no bank deposit reaches that horizon.

Treasury bills are the short end, issued for 91, 182 and 364 days. They pay no coupon. You buy below face value and they redeem at par, so your return is the discount. Treat them as a sovereign substitute for a very short FD.

State Development Loans are bonds issued by individual states. They carry a small yield premium over central G-secs, because a state is in theory marginally riskier than the centre, though the RBI manages state borrowings and an SDL has never defaulted. The premium is real; so is the liquidity cost, which I come back to.

Sovereign Green Bonds joined FAR on June 5, 2026, so NRIs can now hold the eligible-tenor green bonds under the same liberal, repatriable framework as ordinary G-secs.

Now the exclusions. Sovereign Gold Bonds are not available to NRIs on the platform, partly because the government has not issued a fresh SGB tranche in some time and partly because the scheme was never plumbed into Retail Direct for non-residents. If gold is the goal, see Sovereign Gold Bonds for NRIs; it is a separate decision. And floating rate bonds are not offered to NRIs here. You are buying fixed-rate sovereign debt, full stop, which matters because it means your entire return assumption rests on the rate you lock at purchase.

Eligibility is easy; it is the Indian SIM that trips people

The legal test is one sentence: you must be a non-resident eligible to invest in government securities under the Foreign Exchange Management Act, 1999, which the platform reads as a "non-resident retail investor eligible under FEMA." If you are an Indian passport holder working in the UK, UAE, USA or Canada, or you hold an OCI card, you almost certainly clear it. Eligibility is not where NRIs fail.

Opening the account is where they fail, and almost always at the same point. You need a PAN card, an NRE or NRO savings account with net banking or UPI at an Indian bank, an Indian mobile number for OTP authentication, a scanned signature, and usually a cancelled cheque from the funding account. Of those, the Indian mobile number is the chokepoint. The OTP-based KYC will not complete without a live Indian SIM that can receive messages, and a large share of NRIs let that SIM lapse a year or two after moving abroad. Sort the number before you start the application, not halfway through it.

One myth to kill while we are here. Older write-ups, including some that still rank, say you must use an NRO account, because the original resident-led design assumed NRO and Aadhaar-linked numbers. That was never the binding rule for repatriation-minded NRIs. You can fund from either NRE or NRO, and as the next section shows, that choice decides whether your money can ever come home. Do not let a stale article push you into NRO by default.

Opening the RDG account, and how you actually buy

The account is a Retail Direct Gilt (RDG) account, held with the RBI itself in your name. It is not a demat account at a depository and not a unit holding inside a mutual fund. The RBI is your custodian, which is the entire point of the scheme. Registration runs online at the official portal: you register with PAN, name, the Indian mobile number and email for OTPs, and select the non-resident investor option; you complete KYC and submit funding-account details, which takes longer for NRIs because the system has to validate non-resident status; you link the NRE or NRO account; and once KYC clears the RBI activates the gilt account. There is no opening charge, no annual maintenance fee, and no brokerage. The RBI runs this as public infrastructure, not a profit centre.

Buying works in two places. In the primary market you place a non-competitive bid in the weekly and fortnightly auctions, which means you accept the cut-off price the large institutions set and are guaranteed allotment up to your bid size. The bid sits between a floor of Rs 10,000 and a ceiling of Rs 2 crore per security per auction, which is generous for almost any individual but is a real cap to know if you are deploying a very large rupee corpus in a single auction. In the secondary market you buy and sell through the platform's order window at prevailing prices. For NRIs and OCIs there is no overall ceiling on FAR-eligible securities, only that per-auction limit on the non-competitive route.

NRE versus NRO is the only funding decision that controls repatriation

This is where the real money decisions live, so slow down. Everything else on the platform is plumbing; this is the valve.

Fund a purchase from your NRE account and the investment and everything it throws off, coupons and maturity proceeds, are repatriable. The money can flow back to your country of residence freely, because NRE money is your foreign earnings already brought in through banking channels in convertible form, so the system lets it leave again without ceremony.

Fund from your NRO account and the holding is non-repatriable by default. NRO is where India-sourced income lives, rent, dividends, a resident-era balance, and the RBI caps what you can send abroad out of it at USD 1 million per financial year across all your NRO outflows combined, only after taxes are paid and a chartered accountant certifies the remittance on Forms 15CA and 15CB.

Now overlay FAR. Since April 1, 2020 it designates a specific list of securities as open to non-residents with no quantitative ceiling and free repatriation of capital and returns, and the June 5, 2026 expansion widened that list to the 15, 30 and 40-year tenors and Sovereign Green Bonds. The practical hierarchy, from most to least flexible, is worth committing to memory: a FAR security funded from NRE is the cleanest position there is, no ceiling and fully repatriable, and it is exactly the configuration the reforms were built to reward; a FAR security funded from NRO is uncapped on the investment but repatriates only through the USD 1 million NRO limit; a non-FAR security funded from NRO sits under the older framework limits and the same NRO cap. So if your purpose is to deploy genuinely foreign capital and keep the option to take it home, use NRE money and stick to FAR securities. If you are recycling India-sourced rupees you never intend to repatriate, NRO is fine and the cap is irrelevant to you.

Why the interest is still taxable for you, in detail

Here is the part the June 2026 headlines muddled, so read it slowly, because getting it wrong means either overpaying or underpaying.

The Ordinance's exemption is for FIIs and the BIS. There are two reasons an individual NRI cannot quietly claim it. First, it is drafted by reference to those categories, and a retail RDG holder is neither an FII nor an FPI. Second, the one concessional sliver that ever touched bond interest for foreign investors, Section 194LD's 5% withholding on G-sec and rupee-denominated-bond interest, was always limited to FIIs and Qualified Foreign Investors and largely lapsed for fresh flows after July 1, 2023. So there is no back door from the institutional regime into your hands. For you, the ordinary rules apply, in two pieces.

On interest income, your coupon is taxable in India, added to your Indian income and taxed at your slab rate by default. Where Section 115A governs an NRI's interest, a flat rate can apply on a gross basis instead, and you can claim a lower rate under the DTAA with your country of residence. One structural quirk matters more than the rate: the RBI has historically not deducted TDS on G-sec coupon payments, unlike almost every other Indian security. That does not make the income tax-free. It shifts the entire reporting burden onto you, through your Indian return. The absence of withholding is a trap, not a gift; the tax is still due, and the only thing missing is the bank doing the paperwork for you.

There is one genuinely unsettled point, and I am flagging it as unsettled on purpose rather than papering over it. When G-sec coupons are credited to an NRE account, the question of whether NRE's favourable treatment, the same logic that makes NRE FD interest tax-free, extends to the coupon is an area where law and practice are still settling. Do not assume it does on the strength of a blog, this one included. It is exactly the point to get a chartered accountant's read on your facts and your year.

On capital gains, if you sell a G-sec in the secondary market before maturity, or a T-bill matures at a gain, the profit is a capital gain on a listed security, so the holding period that matters is 12 months, not the 24 or 36-month thresholds you may remember from older debt rules. Held 12 months or less, it is short-term at your slab rate. Held more than 12 months, it is long-term at 12.5% without indexation. TDS applies on these gains for NRIs, and you can take DTAA relief and a home-country credit for tax paid in India. If you simply hold to maturity and collect the face value, there is generally no capital gain on redemption of principal at par; your return was the coupon stream, taxed as interest above.

The arithmetic against the NRE FD, on three real choices

Put the rules on actual numbers, because the case for and against bonds only becomes honest with a slab attached. Current NRE FD rates across SBI, HDFC, ICICI and Axis sit roughly between 6.50% and 7.25%, with a few small finance banks reaching toward 7.55%, and all of it is tax-free in India.

Take Anjali, a UK-based NRI in the 30% Indian slab, with Rs 50,00,000 of NRE money she does not need back for years and wants to lock at a known yield. She is weighing a newly FAR-eligible 30-year G-sec yielding 7.10% against a 5-year NRE FD at 7.00% she would roll over. The G-sec pays 7.10% of Rs 50,00,000, or Rs 3,55,000 a year, but the coupon is taxable; at 30% plus 4% cess her effective rate is about 31.2%, so tax is Rs 1,10,760 and her after-tax coupon is Rs 2,44,240, an effective 4.88%. The FD pays 7.00% of Rs 50,00,000, or Rs 3,50,000, and because NRE FD interest is tax-free in India with no TDS and no return to file, she keeps the whole Rs 3,50,000, a clean 7.00%. On after-tax income the FD wins by more than Rs 1,00,000 a year, because its tax-free status is worth far more than the bond's slightly higher headline coupon. So why would Anjali ever take the bond? Two reasons the income line hides. The FD locks the rate only for five years; when it matures she is at the mercy of whatever rates exist in 2031, while the G-sec locks 7.10% for three decades. And the G-sec is tradable, so if yields fall she can sell at a capital gain rather than only clipping coupons. For income today, the FD. For a thirty-year bet that rates fall, the bond.

Now Rahul, a UAE-based NRI parking Rs 20,00,000 of NRE money for about a year with sovereign safety. He compares a 364-day T-bill with a 1-year NRE FD at 7.25%. Suppose the bill is priced so he pays Rs 18,70,000 for paper redeeming at Rs 20,00,000, a discount of Rs 1,30,000, about a 6.95% pre-tax yield. The gain on redemption is taxable in India. Rahul pays no personal tax in the UAE, so there is no foreign tax to credit and no DTAA rate to chase down on this, but the Indian tax still bites at his effective 31.2%: tax of Rs 40,560 leaves him Rs 89,440, an after-tax 4.78%. The FD pays 7.25% of Rs 20,00,000, or Rs 1,45,000, tax-free, a clean 7.25%. The FD wins by Rs 55,560 on a single year. The lesson repeats: for an NRI in a real Indian slab, the tax-free NRE deposit is hard to beat on after-tax return for short and medium parking. The T-bill's case is not yield. It is a direct claim on the sovereign with no bank intermediary, which for very large sums, where the Rs 5 lakh deposit-insurance ceiling feels thin, carries a structural weight a bank FD does not.

The third comparison is the one that flatters the bond, and it is worth seeing because it shows when the answer flips. Suppose Anjali bought her 30-year G-sec at 7.10% and two years later the 30-year yield has fallen to 6.10%. A long bond's price moves roughly with duration times the yield change; on a bond with an effective duration near 13, a one-percentage-point fall lifts the price by very roughly 13%. On her Rs 50,00,000 of face value that is on the order of Rs 6,50,000 of capital appreciation she can realise by selling, taxed at 12.5% as a long-term gain rather than at her 31.2% slab. Had she held the FD instead, a falling-rate world gives her nothing to sell; she simply renews at the new, lower deposit rate. This is the bond's real edge stated precisely: it is not the coupon, it is that you own a tradable instrument whose price rises when rates fall, and the gain is taxed at the gentler capital-gains rate. The FD cannot do that. It also cuts the other way, so do not treat it as free: if yields rise, your long G-sec falls in price and you are locked into a below-market coupon unless you sell at a loss.

A decision table for what you actually hold

What you are choosing	Tenor / threshold	NRI tax on the return	After-tax verdict vs NRE FD	The thing to watch
Dated G-sec, held to maturity	Out to 40 years	Coupon at slab; no TDS withheld	FD usually wins on income; bond wins on duration	You owe the tax even with no TDS; file it
Dated G-sec, sold early	LTCG over 12 months	12.5% on the price gain	Bond can win if rates fell since purchase	Price falls if rates rose; duration risk
T-bill	91 / 182 / 364 days	Discount taxed as income at slab	FD wins for high-slab NRIs	Pure parking; FD is simpler
State Development Loan	As above	Same as G-sec	Small yield pickup, real liquidity cost	Thin secondary bid; size to hold to maturity
Sovereign Green Bond	FAR-eligible tenors	Same as G-sec	Same as the equivalent G-sec	New to FAR; check current designation

Liquidity is the risk the brochures skip

A G-sec is liquid in theory and patchy in practice for a retail holder, and that gap is the single most under-stated risk on the platform. The institutional market trades the on-the-run benchmark bonds in enormous size, but an individual NRI trying to offload an off-the-run State Development Loan in the Retail Direct secondary window can find the bid thin and the spread punishing. Treat secondary-market exit as a real risk on smaller and older issues, prefer the liquid central G-sec benchmarks if you might sell early, and size any SDL position to the assumption that you hold it to maturity. T-bills, being short, you simply hold to redemption. The FD, for all its tax drag, you can always break with a penalty, which is its own form of liquidity. Match the instrument to whether you might actually need the money before maturity, because a bond you cannot sell at a fair price is not the liquid asset the headline yield implies.

Edge cases worth knowing before you commit

You are a US person. The US taxes worldwide income, so your Indian G-sec interest and gains are reportable on your US return regardless of Indian treatment, with a foreign tax credit for Indian tax paid under the India-US DTAA. The RBI not withholding TDS on coupons reduces your US reporting obligation by exactly nothing. The same global-income logic applies in the UK and Canada. The UAE, with no personal income tax, is the clean case, which is why Rahul's example carried no foreign-tax layer.

You let your Indian SIM lapse. This blocks OTP-based KYC and is the most common reason an NRI cannot open or operate the account. It is mundane and it stops people cold. Fix the number first.

You become a resident again. If you return to India for good and your status flips, your RDG account and tax treatment change, and the repatriation framework that governed your NRE-funded holdings stops applying. Update KYC and tax residency promptly.

The FAR list changes. The eligible-security list is revised periodically, as it was on June 5, 2026. A security that was FAR-eligible when you bought stays governed by the rules at purchase, but check the current designation before each new purchase rather than assuming last quarter's list still holds.

The retail exemption might follow the institutional one. It is plausible the government eventually extends a G-sec tax break to individuals, and there is already reporting that it is weighing a wider cut to bond withholding to court foreign capital ahead of global index inclusion. If that day comes, the maths against the NRE FD shifts sharply toward the bond. It is genuinely unsettled, so watch it, and do not lock a decade-long decision on the assumption it will happen.

The honest read

RBI Retail Direct is excellent infrastructure wrapped around a product whose tax treatment, for individual NRIs, still lags the headline. The platform is free, the access is direct, the FAR framework gives you uncapped and fully repatriable entry to sovereign rupee debt, and the June 2026 expansion to 40-year tenors and green bonds genuinely broadens what you can own. None of that is in doubt.

What is in doubt is whether a taxable G-sec beats a tax-free NRE FD for someone in a high Indian slab, and on after-tax income today, at short and medium tenors, it usually does not, because the FD's interest escapes Indian tax entirely while the bond's does not and the June 2026 exemption that would have flipped this went to institutions. So commit to this for the common case: NRE FDs for the parking, and a long FAR-eligible G-sec funded from NRE money for the slice of your rupee corpus you want anchored at a known yield for the next twenty or thirty years. Buy FAR securities, fund from NRE, hold the long ones to maturity, file your return honestly on the interest even though no TDS arrives to remind you, and use the secondary market only for the liquid central benchmarks. The exception is the rate-fall bet: if you have a strong view that Indian yields are heading down and you want a tradable instrument whose price rises and whose gain is taxed at 12.5% rather than your slab, a long G-sec is the cleaner expression of that view than any deposit. And keep one eye on whether the retail exemption ever follows the institutional one, because the day it does, this entire calculation changes.

Related guides

• Building an India corpus as an NRI
• NRE FD vs FCNR FD: which deposit wins
• Sovereign Gold Bonds for NRIs
• NRI corporate bonds and NCDs
• Repatriating investment proceeds out of India
• NRE, NRO and FCNR accounts explained
• FCNR deposits explained
• Capital gains tax for NRIs on shares and mutual funds
• Tax on NRO interest
• ITR filing for NRIs, AY 2026-27
• All taxation guides
• All banking guides
• All investments guides

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This guide is general information for Indian expats, not personal financial, tax, or legal advice. The taxation of NRI government securities, the scope of the Income-tax (Amendment) Ordinance, 2026, and the treatment of G-sec interest credited to NRE accounts are evolving as of June 2026. Rates, eligibility, the Fully Accessible Route security list, and repatriation rules change. Verify the current position with a qualified chartered accountant and the official RBI Retail Direct portal before acting, and account for your home-country tax obligations under the relevant DTAA.