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Fixed income and savings

Government Securities

Lend directly to the Government of India or a state government, with no credit risk from the central government.

Read the guide Present Value
Issuer
Government of India and state governments
Managed by
Reserve Bank of India (RBI)
Buy directly
RBI Retail Direct portal, free to use
Maturities
91 days to 40 years
Risk level: Low

No default risk on central government securities, but long-dated bond prices can swing with interest rates.

What is it?

Government securities (G-secs) are how central and state governments borrow. The central government pays its debts in rupees it controls, so its securities carry no practical risk of default, which makes them the benchmark for every other interest rate in India.

Retail investors can buy them directly through the RBI Retail Direct portal, or indirectly through gilt mutual funds and government bond index funds.

How it works

  1. Open a free Retail Direct Gilt account with RBI online using your PAN and bank details.
  2. Bid in primary auctions as a non-competitive bidder, which gets you the auction's average price.
  3. Receive half-yearly interest on dated securities, or the face value at maturity for T-bills.
  4. Sell before maturity on RBI's NDS-OM platform through the same portal.

Types

Treasury bills91, 182 and 364-day securities issued at a discount and repaid at face value.
Dated securitiesBonds of 5 to 40 years with a fixed half-yearly coupon.
State Development LoansBonds issued by state governments, usually at slightly higher yields.
RBI Floating Rate Savings Bonds7-year bonds whose rate resets every six months, at 0.35% above the NSC rate.

Benefits and risks

Benefits

  • Highest safety of principal and interest.
  • No platform fee on RBI Retail Direct.
  • Long maturities let you lock in today's rates for years.
  • Useful for matching a known future expense.

Risks and drawbacks

  • Long bonds fall in price when interest rates rise.
  • Secondary-market trading for individuals can be thin.
  • Interest is fully taxable, so post-tax returns can trail inflation.

How it is taxed

  • Interest is taxed at your slab rate.
  • Listed government securities held over 12 months: gains taxed at 12.5%; earlier at your slab rate.
  • Gains on T-bills, which are issued at a discount, are generally taxed at your slab rate.
Rules for FY 2026-27, reviewed November 2026. Surcharge and cess apply on top. Tax rules change, so confirm before you file. Our tax team can help with your return.

Who it may suit

Conservative investors, retirees and anyone who wants certainty of repayment for a known future date.

Getting started

  1. Register on rbiretaildirect.org.in and complete video KYC.
  2. Choose a T-bill or bond whose maturity matches your need.
  3. Bid in the weekly T-bill or periodic bond auctions.
  4. Hold to maturity to avoid price risk.

Common questions

Are government bonds risk-free?

Central government bonds are free of default risk. They are not free of price risk: if you sell a long bond after rates rise, you can lose money.

How is a gilt fund different?

A gilt fund pools many government bonds and is actively managed. It is easier to buy and sell but has no fixed maturity, so its value can move more.

This guide is general education, not investment, tax or legal advice, and does not recommend any product. Investments in securities markets are subject to market risks; read all related documents carefully before investing.