Let me solve your query: Can NRI invest in tax free bonds? NRIs in India can invest in tax-free bonds issued by government-backed entities like NHAI, IRFC, PFC, and HUDCO. These bonds offer interest income exempt from Indian tax under Section 10(15), making them an attractive, stable option for higher-income individuals. Typically issued for long tenures (10 to 20+ years), they pay fixed coupons annually or semi‑annually.
To invest, NRIs must hold an NRE, NRO, or FCNR account and a Demat account. You can apply during new issues via a bank or broker, or purchase existing bonds on the secondary market through platforms like RBI’s Retail Direct.
Benefits include:
Tax-free interest in India, boosting net returns.
Low credit risk, since these bonds are PSU/government-backed.
Full repatriability of both interest and principal via NRE/FCNR accounts or up to USD 1 million from NRO annually.
Liquidity can be limited; market value fluctuates with interest rates, though holding to maturity safeguards principal. Return-to-risk ratio could be low for lower tax-bracket investors. NRI capital gains tax applies if sold before maturity; long-term capital gains taxed at 20% with indexation, short-term per slab. NRIs also face TDS deducted at source from interest payment.
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Can NRI Invest in Tax Free Bonds?
pragati
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2025-06-28T14:53:29+00:00 2025-06-28T14:53:30+00:00Comment
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