7 Government Bonds NRIs Can Invest In To Grow Their Money

Being a Non-Resident Indian (NRI), it can be difficult to keep track of investment options that can offer good returns. However, if the option is offered by either the government of India or the Reserve Bank of India (RBI), you can think about investing in it without worrying too much about the returns.

This article talks about the government bonds in which NRIs can invest and watch their money grow over a while.

What Are Government Bonds And How Do They Work?

Government bonds are investment options issued by the government of India to collect money for projects and their day-to-day operations. These are fixed-income securities with a fixed rate of interest over a pre-decided tenure.

Finance experts see these bonds as the safest form of investment. These bonds are traded on the stock exchange, thus, allowing investors to buy and sell these with tax benefits attached.

What Are The Government Bonds In Which NRIs Can Invest?

Shavir Bansal, a finance content creator who runs a page, Bekifaayati, on Instagram, said, that it is crucial that people understand the regulatory framework governing the Indian Bond Market. He added, "In April 2020, NRIs were granted access to invest in Government Bonds through the 'Fully Accessible Route'. It means NRIs can explore the opportunities to invest for 5, 10 or 30 years.

He said, "It is important to note that bond subscriptions are time-bound, and in case of oversubscription, the issue closes for further subscriptions. Therefore, NRIs must act promptly during the limited subscription period if they wish to invest in these bonds."

1. Public Sector Unit (PSU) and Capital Bonds

Public sector bonds are tax-free, and the interest you earn on them goes tax-free under section 10 (15) (IV) (h) of the Income Tax (IT) Act. But investing in them does not come under tax exemption. But if you buy capital gains bonds, you can claim an exemption under section 54EC. However, you should ensure that the lock-in period is three years.

2. Secure Corporate Bonds and Non-Convertible Debentures (NCDs)

These bonds are issued by companies or corporations. Their tenure period can range between 1-20 years. However, the best aspect of these bonds is that they are tradable instruments, which means you can trade them in different markets.

3. Government Tax-free NRI Bonds

These are similar to capital gain bonds. There is no exemption on tax, but an investor can claim a deduction on the interest under section 10 (15) (IV) (h).

4. Debt Mutual Funds

Debt Mutual Funds offer NRIs a fixed rate of interest. Once you have submitted the Foreign Account Tax Compliance Act (FATCA) declaration, you are eligible to invest in these funds from your Non-Resident Ordinary (NRO) Account or Non-Resident External (NRE) account.

5. Zero-Coupon Bonds

A Zero Coupon Bond (ZCB) is an investment option in which the issuer sells a bond at a huge discount to the investor and comes with a lucrative profit option upon maturity. In most cases, the difference in the selling price and face value of a bond is the amount that the investor will make as a return.

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6. RBI NRI Bonds

The RBI issues G-sec (Government of India Securities) bonds in which NRIs can invest for the long-term. The tenure varies between 5-40 years. Depending on the locking period of the bond, the rate of interest varies between 6.18%-7.72%.

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7. Bharat Bond ETF Or FOF

Bharat Bond ETF (Exchange Traded Fund) and FOF (Funds of Funds) investments are considered the safest by NRIs. These are tradable debt ETFs or bonds issued by government agencies and public sector companies. They are available at low cost but offer a good return on investment.

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