Can NRIs Invest in Government Bonds? (2024)

FAQs

Can NRI invest in govt bonds in India? ›

Reserve Bank of India has enabled NRIs to invest in Government of India bonds-G-sec. They are long-term securities. The tenure range for such bonds is from 5 to 40 years. Based on the tenure, these bonds provide yields between 6.18% and 7.72%.

NRI Bonds: Capital Gains

NRIs can invest in capital gains bonds issued by REC and NHAI under Section 54EC to claim deductions on capital gains. These bonds have a three-year lock-in. Another type of bonds NRIs can invest in are infrastructure bonds.

The easiest way to invest in US treasuries and corporate bonds from India is through low-cost ETFs. Such investments are possible under the Liberalised Remittance Scheme of the RBI.

If the interest is from tax-free bonds, then the NRI is not liable to pay taxes. The capital gains are taxable if the investors sells the bond on the stock exchange before maturity. Short-term capital gains (gains earned within a year from the date of investment) are taxable as per the investor's income tax slab rate.

Sovereign Gold Bonds

The government of India has initiated this scheme with an interest rate of 2.5 % per annum; however, NRIs are not allowed to invest in these gold bonds. However, if they have already invested in these bonds before acquiring NRI status, they can hold it till early redemption or maturity.

According to the new rules, if an NRI (with taxable income in India of over Rs 15 lakh) stays in India for 120 days or more during any financial year, and his/her cumulative stay in the country in the preceding 4 years is also 365 days or more, then he/she would be treated as a resident of India.

Long-term capital gains are taxed at 20%. Do note that long-term capital gains earned by NRIs are subject to a TDS of 20%. NRIs can claim exemptions under Section 54, Section 54 EC, and Section 54F on long-term capital gains.

Tax exemption

If you invest the capital gains in buying another property within two years, then the profit generated from the sale is exempted from tax. Similarly, under section 54EC, you can invest the profit from the sale of property in Capital Gains Bonds within six months to get an exemption.

Though there are several differences between an NRE and NRI account, you will need both to manage your funds. An NRE account proves useful for your foreign earnings and you can even send money back to your country of residence freely. An NRI account helps keep your income earned in India safe and within India.

What are the disadvantages of NRI account? ›

It can only be opened with another NRI. It can only be opened with another NRI. The interest earnings can be repatriated fully. The principal amount can only be repatriated to the extent of 1 million USD or equivalent in a fiscal year.

RBI NRI Bonds

Depending upon the tenure, NRI bonds' interest rates range from 6.18%-7.72%. The trading of bonds yields a set return, known as the 'coupon rate' or 'interest rate. ' The interest rate might be either fixed or variable. However, NRIs are not allowed to invest in Floating Rate Bonds.

Non-resident Indians can invest in government bonds and securities, including PSU bonds, G-Sec Bonds, and treasury bills. Government bonds are loans that government or PSUs take from resident or NRI investors such as individual investors, HNIs, insurance companies, mutual fund houses.

Yes, you can buy Treasury bills through TreasuryDirect.gov. In fact, many foreign central banks own a LOT of Treasury bills — more than $1 Trillion each are owned by Japan and China! As an individual you must file IRS FORM W-8BEN Certificate of Foreign Status of Beneficial Owner for United States Treasury bills.

If the tax-free bonds are sold in a year, then one is liable to pay taxes on the basis of their income tax slab. However, if the bonds are retained for more than a year, then, under section 112 of the Income Tax Act, the tax payment on the returns will be 10% without indexation or 20% with the benefit of indexation.

Dividend income from investment made in shares of an Indian company or units of mutual fund: For an NR, dividend income from investments made in India is usually taxable at 20% without providing for any deductions available under the Act.

TDS applies to such non-residents for any amount generated from business transactions in India. The amount may or may not be an income of a profit. NRIs have to pay TDS even for income types from which resident Indians are exempt, like dividends on mutual funds.

Tax Implications on Investment in Fixed Deposits

An NRE Fixed Deposit is exempt from taxation, but an NRO Fixed Deposit is liable for the NRI tax due. Interest earned on NRE Fixed Deposit is exempt from tax in India but there is TDS applicable on interest earned on NRO Fixed deposit.

Though the tenor of the bond is 8 years, early encashment/redemption of the bond is allowed after fifth year from the date of issue on coupon payment dates. The bond will be tradable on Exchanges, if held in demat form. It can also be transferred to any other eligible investor.

Retirement planning: Investment in India can help NRIs secure their future. Investment in India is a safe and secure option for NRIs wishing to stay close to their family members after retirement. For good returns: Investing more money in India in the right direction can fetch NRIs more returns when required.

Can NRI invest in PPF? ›

Can a non-resident Indian open a PPF account? No, any person who exists as a non-resident Indian does not qualify to open this account. NRI status disqualifies an individual from opening, operating and managing a PPF account.

Fresh issue of regular paper long term (10 years) tourist visas has also been restored for nationals of USA. Maximum stay by a foreigner in India on an e-Tourist visa or regular paper Tourist visa or both in one calendar year shall be restricted to 180 days.

Proof of NRI Status - Copy of valid visa/ work permit / Overseas Resident Card. Address Proof - The address on the document must be the same as the address mentioned in the application form.

NRE accounts are ideal for inward remittances (foreign earnings) and freely repatriable. However, upon your return to India permanently, you will have to convert your existing NRO / NRE savings account and deposits into resident savings account and deposits.

Yes. NRIs should file an income tax return in India if they have taxable income in India. For example, an NRI having a house property in India, earning rental income would be required to file an income tax return, if the rental income exceeds the exemption amount.

NRIs can easily claim TDS refunds on income earned from India. Owing to Section 195 of the Income Tax Act, TDS deductions for NRIs are applicable to every type of income.

Yes, you can bring the proceedings to the US. It is recommended that you get the payment of the property through proper banking channels. Documenting proof is required for transferring money on sale of property. The first step is to get a certificate from a Chartered Accountant (CA) in India.

The NRI seller can also apply in Form 13 to obtain a lower/ Nil TDS (under Section 197) for such receipts. The Assessing Officer will issue a certificate mentioning the amount of tax deduction, the basis of which the buyer of the property would be liable to deduct TDS on total sale consideration.

An NRI can sell property anytime but he or she will need some documents like: Title of the property (which is in the seller's name) Occupation Certificate from the municipal corporation in India.

Do you pay tax on NRE account in USA? ›

Since the interest on such deposits is fully exempt the bank will not deduct any tax on such interest at source. However the interest on NRE account will become fully taxable once you become a resident under the FEMA.

You can open NRE account from USA to park their overseas income and convert it into INR. Account can be opened either individually or jointly with other NRIs/ PIOs/ OCIs and close relatives on 'former or survivor' basis. Interest earned on SBI NRE account is exempt from Indian Income Tax.

By default, income earned by an NRI abroad is not taxable in India. But if the income in India through aspects like capital gains from investments in shares, mutual funds, property rental and term deposits exceed the basic exemption limit as defined in the Income Tax Act, an NRI would have to file a tax return.

You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.

Answer: An NRO (current/ savings) account can be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India.

Government Securities

Bonds issued by the Central and State Governments are called Government security. Since these are issued by Governments they carry no credit risk. These are one of the safest types of investment options in India to earn periodic interests and principal on maturity.

Foreign investors snap up Indian bonds set for inclusion in global indexes. MUMBAI: Foreign investors have stepped up purchases in a clutch of Indian government bonds that have no limits on foreign investments ahead of an anticipated inclusion of Indian debt in global bond indexes, analysts said.

Open Instant Account and start trading today. The government of India has allowed NRIs to invest in dated government securities and treasury bills on a repatriation and non-repatriation basis.

Can I buy I bonds if I am not a US citizen? ›

The U.S. Treasury doesn't let just anyone purchase I bonds, so you'll need to see if you qualify to buy them. You'll need to be one of the following: A U.S. citizen, even if you live abroad. A U.S. resident.

United States citizen, whether the person lives in the U.S. or abroad, or. United States resident, or. Civilian employee of the United States, no matter where that person lives.

Taxation of federal government bonds

Income from bonds issued by the federal government and its agencies, including Treasury securities, is generally exempt from state and local taxes.

Also, to keep in mind, by investing in the bond issued by a company, the investor is taking the risk that the company will pay back. In an FD, up to 5 lakhs is insured, which isn't the case with Bonds,” she said.

Public Provident Fund (PPF)

PPF is a government-sponsored savings and retirement planning direct tax free investment. It is beneficial for individuals without a structured pension plan. The interest rate on the PPF is linked to the debt market.

In order to invest in RBI bonds, NRIs must first obtain a “PAN” number. This is a unique ten-digit alphanumeric code issued to all individuals by the Income Tax Department in India. The PAN number is required to open an account with any bank in India and to make investments in securities such as RBI bonds.

Non-resident Indians can invest in government bonds and securities, including PSU bonds, G-Sec Bonds, and treasury bills. Government bonds are loans that government or PSUs take from resident or NRI investors such as individual investors, HNIs, insurance companies, mutual fund houses.

the sole holder or all the joint holders may also nominate a Non-resident Indian (NRI) as his/her/their nominee(s). every nomination and every cancellation or variation shall be registered at the RO where the Bond is issued and shall be effective from the date of registration.

If the tax-free bonds are sold in a year, then one is liable to pay taxes on the basis of their income tax slab. However, if the bonds are retained for more than a year, then, under section 112 of the Income Tax Act, the tax payment on the returns will be 10% without indexation or 20% with the benefit of indexation.

Is RBI bond better than FD? ›

In the scenario of falling interest rates of fixed income schemes like Fixed Deposits offered by Banks, RBI Bonds are not just a better option but it is a blessing in disguise.

An NRE Account or Non-Resident External Account offers you this facility. Here, your money is converted into Indian Rupee or INR at the time of deposit. This means that you can deposit money in any foreign denomination, e.g. US Dollar and withdraw it in Indian Rupees.

It is mandatory: As per the Foreign Exchange Management Act (FEMA) guidelines, NRIs cannot hold resident FDs. They must convert it to an NRO deposit account. There is a penalty if you do not get the conversion done.

Yes, Non Resident Indians (NRI) and Persons of Indian Origin (PIO) can invest in Indian Mutual Funds on a full repatriation as well as non-repatriation basis. However, NRIs would have to comply with all regulatory requirements such as completion of KYC before investing.