Bond Investing for NRIs: Invest in Indian Bonds
14 May 2025 · Sachin Gadekar
A complete guide for Non-Resident Indians looking to tap into India’s bond market for stable returns and long-term growth.
Why Indian Bonds Appeal to NRIs
India’s bond market is no longer reserved for domestic investors alone. With rising interest rates, favourable currency dynamics, and greater regulatory access, Non-Resident Indians (NRIs) are increasingly looking at bonds in India to diversify their portfolios and lock in attractive returns.
In this beginner’s guide, we break down bond investing for NRIs—the options available, how to get started, the tax implications, and why Indian bonds might be the stable asset your global portfolio needs.
NRIs often face limited income-generating, fixed-income options abroad, especially in low-interest economies like the US, UK, or UAE. In contrast, Indian bonds offer:
High yields (8–10% for corporate bonds)
Multiple types of bonds for different risk profiles
INR-denominated assets (ideal for future India plans)
A way to diversify from volatile global equity markets
🏗️ Types of Bonds NRIs Can Invest In
| Bond Type | Ideal For | Returns | Liquidity |
|---|---|---|---|
| Government Bonds (G-Secs) | Risk-averse NRIs | 6.5–7.5% | Medium (via RBI Retail Direct) |
| Corporate Bonds | Balanced risk-takers | 8–10% | Moderate (depends on issuer) |
| Tax-Free Bonds | High-income NRIs in top tax slabs | 5.5–6.5% (tax-exempt) | Low to Moderate |
| Non-Convertible Debentures (NCDs) | NRIs seeking fixed income | 8–9.5% | Moderate (listed NCDs tradable) |
🌐 Can NRIs Legally Invest in Indian Bonds?
Yes! The RBI and SEBI have created multiple channels for NRIs to participate in the debt market:
RBI Retail Direct: NRIs with NRO accounts can buy government bonds directly via rbiretaildirect.org.in.
NRI-specific NCDs: Some issuers offer NCDs specifically for NRI investors during public issues.
Demat route: NRIs can buy listed bonds through their NRE/NRO demat accounts.
Note: Always check whether the bond is eligible for NRI participation before investing.
💰 How to Invest in Bonds as an NRI (Step-by-Step)
Choose the right account: Use an NRE or NRO-linked demat and bank account.
Research eligible instruments: Not all bonds are open to NRIs—check offer documents.
Select your platform: Use brokers, banks, or digital portals offering bond access.
Place your order: Invest during IPO (primary issue) or buy from the secondary market.
Track and reinvest: Use bond ladders or reinvest coupon payouts to compound returns.
📉 Taxation on Bonds for NRIs
| Income Type | NRE Account | NRO Account | Taxability |
|---|---|---|---|
| Government Bond Interest | Tax-free* | Taxable | Depends on type |
| Corporate/NCD Interest | Tax-free* | 30% TDS | TDS applicable |
| Tax-Free Bonds | Tax-free | Tax-free | No TDS on listed ones |
| Capital Gains | 10–20% | 10–20% | Based on tenure & listing |
🧱 Sample Allocation for an NRI Portfolio
| Goal | Recommended Bond Type | % Allocation |
|---|---|---|
| Monthly cash flow | NCDs, Corporate Bonds | 40% |
| Capital preservation | G-Secs, Tax-Free Bonds | 30% |
| Short-term parking | T-Bills, Short-Term Bonds | 20% |
| Growth with risk | Equity/Fractional Assets | 10% |
🌍 Why Bonds Matter in a Global NRI Strategy
NRIs are exposed to foreign currency risks, inflation gaps, and global volatility. Indian bonds help:
Hedge future INR expenses (like a home, child’s education)
Lock in attractive yields
Balance your equity-heavy overseas portfolio
At getultra.club, we help investors access multiple alternative investment opportunities—including those that complement a bond-based core.
🧠 Expert Tips
Choose tax-free or listed bonds to minimize TDS impact.
Use a bond laddering strategy to manage liquidity while earning higher returns.
Diversify across issuers, tenures, and credit ratings to lower overall risk.
📌 FAQs: NRI Bond Investing
Q1. Can NRIs invest in Indian bonds from abroad?
Yes. Through NRO-linked demat accounts and RBI Retail Direct, NRIs can invest without physically being in India.
Q2. Which bonds are best for NRIs?
G-Secs and tax-free bonds are ideal for low-risk NRIs. NCDs work well for those wanting higher income.
Q3. Are returns from Indian bonds repatriable?
Returns from NRE accounts are fully repatriable. For NRO, repatriation is subject to RBI limits and documentation.
Q4. Are bonds better than FDs for NRIs?
Yes, bonds can offer better post-tax returns, more flexibility, and market tradability, especially for long-term investors.