Rs 10,000 Is All You Need. RBI Retail Direct Charges Zero. OBPPs Hide a 0.25-1.5% Spread. Listed Bonds Get 12.5% LTCG After 12 Months While Debt Funds Pay Slab Rate. Here Is Every Way to Buy Bonds in India — With the Costs Nobody Tells You About.
You can buy government bonds directly from RBI for free. You can buy corporate bonds on platforms that claim zero fees but embed a hidden spread. You can bid for NCD public issues through your stock broker. You can buy tax-free bonds on the secondary market at a premium. You can even set up a T-Bill SIP since August 2025.
The bond market has never been more accessible to Indian retail investors. But more access also means more ways to overpay, misunderstand taxation, and underestimate credit risk.
This guide covers every bond type, every buying channel, every cost, and every tax angle — with exact numbers, not vague advice.
Bond Types Available to Indian Retail Investors
| Bond Type | Issuer | Yield Range (2026) | Min Investment | Credit Risk | Liquidity | Tax on Interest |
|---|---|---|---|---|---|---|
| G-Secs | Government of India | 6.5–7.0% | Rs 10,000 | Zero (sovereign) | Moderate | Slab rate, no TDS |
| T-Bills | Government of India | 6.5–6.8% | Rs 10,000 | Zero | High (short tenure) | Discount treated as STCG |
| SDLs | State governments | 6.8–7.3% | Rs 10,000 | Near-zero | Low | Slab rate, no TDS |
| Corporate Bonds (AAA) | Corporates/NBFCs | 7.0–8.5% | Rs 10,000 | Low-moderate | Very low | Slab rate, 10% TDS >Rs 10K |
| Corporate Bonds (AA+) | Corporates/NBFCs | 7.5–9.0% | Rs 10,000 | Moderate | Very low | Slab rate, 10% TDS >Rs 10K |
| Corporate Bonds (AA) | Corporates/NBFCs | 8.0–9.5% | Rs 10,000 | Moderate-high | Near-zero | Slab rate, 10% TDS >Rs 10K |
| NCD Public Issues | Corporates/NBFCs | 8.0–10.5% | Rs 10,000 | Varies by issuer | Post-listing only | Slab rate, 10% TDS >Rs 10K |
| Tax-Free Bonds | NHAI, IRFC, REC, etc. | 5.0–5.7% YTM | Market price (~Rs 11,000-12,000) | Near-zero (PSU) | Low | Exempt from income tax |
| SGBs | RBI (gold-linked) | Gold return + 2.5% | Market price | Zero (sovereign) | Moderate (exchange) | 2.5% at slab; gains complex |
| 54EC Bonds | NHAI, REC | 5.0% (fixed) | Rs 10,000 | Near-zero (PSU) | Zero (5-year lock-in) | Interest at slab rate |
| Bharat Bond ETF | Edelweiss AMC | ~7.5% YTM | Rs 1,000 (1 unit) | Very low (AAA PSU) | High (exchange) | Slab rate (MF taxation) |
Key takeaway: G-Secs and T-Bills offer the best risk-adjusted returns for most investors. Corporate bonds only make sense if the extra yield compensates for credit risk, illiquidity, and the hidden costs of buying them.
For a detailed comparison of corporate bonds versus government bonds with after-tax math, read corporate bonds vs government bonds — the honest math.
Where to Buy: Every Channel Compared
| Channel | Bond Types | Cost to Investor | Min Investment | Best For |
|---|---|---|---|---|
| RBI Retail Direct | G-Secs, T-Bills, SDLs, SGBs (if available) | Zero | Rs 10,000 | Government securities at lowest cost |
| OBPPs (GoldenPi, Wint, Grip, IndiaBonds, TheFixedIncome) | Corporate bonds, NCDs, some G-Secs | Zero fees, hidden spread 0.25–1.5% | Rs 1,000–10,000 | Corporate bonds without a broker |
| Stock Broker (Zerodha, Groww, ICICI Direct, etc.) | Listed bonds on NSE/BSE, tax-free bonds, SGBs, NCDs | Brokerage 0–0.1% | 1 unit (varies) | Secondary market bonds, tax-free bonds |
| NCD Public Issues (via broker) | New NCDs | Zero (broker absorbs cost) | Rs 10,000 | New corporate bond issues at face value |
| Bharat Bond ETF/FoF (via broker or AMC) | AAA PSU bond basket | 0.0005% expense (ETF) | Rs 1,000 | Diversified AAA PSU exposure |
For a detailed platform-level comparison of OBPPs, read GoldenPi vs Wint Wealth vs Grip Invest — which bond platform should you use.
Step-by-Step: Buying on Each Channel
Channel 1: RBI Retail Direct (Government Bonds, T-Bills, SDLs)
This is the single most important channel for retail bond investors. Zero cost. Direct with RBI. No intermediary taking a cut.
Setup (one-time, 10 minutes):
- Go to rbiretaildirect.org.in
- Register with PAN, Aadhaar, bank account, and existing demat account details
- Complete video KYC or Aadhaar e-KYC
- Account activates in 1–3 business days
Buying G-Secs in a Primary Auction:
- Log in on auction day (typically Wednesday/Friday — check RBI auction calendar)
- Select the security (e.g., 7.26% GS 2033)
- Place a non-competitive bid — you get allotted at the auction’s weighted average yield
- Amount debits from your bank account on settlement day (T+1)
- Security credits to your demat account
Setting Up a T-Bill SIP (available since August 2025):
- Select T-Bill tenure: 91-day, 182-day, or 364-day
- Set the amount (minimum Rs 10,000, multiples of Rs 10,000)
- Set frequency — auto-participates in weekly auctions
- Money auto-debits before each auction, matures back to your bank account
What you get: The exact government bond yield with zero intermediary cost. A Rs 10 lakh investment in a 7.0% G-Sec earns Rs 70,000 per year in interest — every rupee comes to you.
For a deep dive into every feature of RBI Retail Direct including the T-Bill SIP, read RBI Retail Direct complete guide.
Channel 2: OBPP Platforms (Corporate Bonds)
Online Bond Platform Providers — SEBI-registered platforms that sell bonds to retail investors.
How it works:
- Sign up on the platform (KYC via Aadhaar + PAN)
- Link your existing demat account (GoldenPi, Grip) or get a new one opened (Wint Wealth)
- Browse available bonds — filter by yield, rating, tenure
- Select a bond, review details (ISIN, coupon, maturity, rating, call option if any)
- Pay via net banking or UPI
- Bond credits to your demat account (T+1 settlement)
The hidden cost nobody talks about: OBPPs buy bonds in bulk at one price and sell to you at a higher price. This spread of 0.25–1.5% is embedded in the quoted yield. On a 3-year bond with a 1% embedded spread, your effective annual yield drops by approximately 33 basis points. The platform shows you 9.5% yield — your real yield might be 9.17%. They never disclose this separately because SEBI does not require it.
When OBPPs make sense: You want corporate bond exposure, cannot meet minimum lot sizes on exchanges, and are willing to hold to maturity. Corporate bond secondary market liquidity is near-zero for retail — treat every OBPP purchase as a hold-to-maturity decision.
Channel 3: Stock Exchanges (NSE/BSE Debt Segment)
Buy listed bonds through your regular stock broker — the same demat account you use for equity.
What you can buy:
- Listed corporate bonds and NCDs
- Tax-free bonds on the secondary market (NHAI, IRFC, REC, PFC — issued 2012–2016)
- SGBs on secondary market
- Government securities (limited selection)
How it works:
- Log into your broker’s trading platform
- Search for the bond by name or ISIN in the debt segment
- Place a buy order (limit order recommended — bid-ask spreads can be wide)
- Settlement is T+1
- Bond credits to your existing demat account
Tax-free bonds on the secondary market: No new issuance since 2016. Trading at 15–20% premium over face value. Current YTM is 5.0–5.7%. At the 30% tax bracket, a 5.5% tax-free yield is equivalent to a 7.86% pre-tax yield — making these attractive for high-bracket investors despite the premium. Read the detailed analysis in our tax-free bonds secondary market guide.
SGBs on the secondary market: RBI stopped new issuances after February 2024. Secondary market SGBs trade at 1–6% discount to spot gold price. You lose the tax-free maturity redemption benefit — capital gains taxed at 12.5% LTCG if held over 12 months. For the full picture on what SGB investors should do now, read Sovereign Gold Bonds are dead — what gold investors should do.
Channel 4: NCD Public Issues
Companies raise money by offering NCDs directly to the public — similar to an IPO but for bonds.
How it works:
- NCD issue opens (watch for announcements on BSE/NSE)
- Apply through your stock broker’s platform (like an IPO application)
- Choose tenure and coupon option (annual, monthly, or cumulative)
- Minimum application: typically Rs 10,000 (1 NCD at Rs 1,000 face value x 10 units)
- Allotment within 6 working days, NCDs credit to demat and list on exchange
Advantage: You buy at face value with no intermediary markup. The coupon rate is what you actually get — unlike OBPP purchases where the spread reduces your effective yield.
Disadvantage: Infrequent. Only a handful of NCD public issues happen each year (mostly NBFCs like Muthoot, Shriram, Bajaj Finance). You cannot pick your issuer — you buy what is available when it is available.
The Complete Cost Breakdown
Most people think bonds are free to buy. They are not.
| Cost Component | RBI Retail Direct | OBPP Platforms | Stock Broker | NCD Public Issue |
|---|---|---|---|---|
| Brokerage/fees | Zero | Zero (stated) | 0–0.1% | Zero |
| Hidden spread | None | 0.25–1.5% | Bid-ask spread (varies) | None |
| DP charges (demat transfer) | Rs 18.50 + GST | Rs 18.50 + GST | Rs 18.50 + GST | Rs 18.50 + GST |
| Stamp duty | 0.003% | 0.003% | 0.003% | 0.003% |
| Demat AMC | Nil (RBI Retail Direct) | Rs 0–500/year (if new demat) | Already included in your broker | Already included |
| STT | Nil | Nil | Nil on debt (not equity) | Nil |
Real cost example on Rs 1 lakh corporate bond purchase via OBPP:
- Stated cost: Rs 0 (zero fees)
- Embedded spread at 0.75%: Rs 750 (reduces yield by ~25 bps/year on a 3-year bond)
- DP charges: Rs 21.83 (Rs 18.50 + 18% GST)
- Stamp duty: Rs 3
- Total real cost: ~Rs 775 or 0.775% of investment
On RBI Retail Direct for the same Rs 1 lakh in G-Secs: Rs 24.83 total (DP charges + stamp duty). That is it.
Tax Treatment: The Table You Need to Save
| Scenario | Tax Rate | Key Detail |
|---|---|---|
| Interest from any bond | Slab rate (up to 31.2% with cess) | TDS 10% on corporate bond interest >Rs 10K/year; no TDS on G-Sec interest |
| Capital gain on listed bond held >12 months | 12.5% flat LTCG | No indexation benefit |
| Capital gain on listed bond held <12 months | Slab rate (STCG) | — |
| Capital gain on unlisted bond held >24 months | 12.5% LTCG | Unlisted bonds need 24 months, not 12 |
| Capital gain on unlisted bond held <24 months | Slab rate | — |
| Tax-free bond interest | Exempt | Only bonds issued by NHAI, IRFC, REC, PFC, HUDCO between 2012–2016 |
| T-Bill discount | Slab rate (treated as interest income) | — |
| SGB maturity redemption (primary holder) | Exempt | Only if held to maturity by original buyer |
| SGB sale on exchange | 12.5% LTCG (if >12 months) | — |
| Debt mutual fund capital gains | Slab rate (always) | Post-2023 change — no LTCG benefit for debt MFs |
| 54EC bond interest | Slab rate | Capital gain invested is exempt under Section 54EC |
The Direct Bond Tax Advantage Over Debt Mutual Funds
This is the single biggest reason sophisticated investors buy bonds directly instead of through debt mutual funds.
Scenario: Rs 10 lakh invested, Rs 80,000 capital gain after 13 months.
| Route | Tax Rate | Tax Paid | You Keep |
|---|---|---|---|
| Listed bond (direct) | 12.5% LTCG | Rs 10,000 | Rs 70,000 |
| Debt mutual fund | 31.2% slab (30% + cess) | Rs 24,960 | Rs 55,040 |
Difference: Rs 14,960 on Rs 80,000 gain. That is 18.7% more money in your pocket by buying listed bonds directly instead of routing through a debt fund.
This advantage exists because the government deliberately removed the LTCG benefit for debt mutual funds in 2023 but kept it for direct bond holdings. For investors in the 30% bracket, this is a significant edge.
Credit Risk: The Part Nobody Wants to Read
Every bond article focuses on yields. The real question is: will you get your money back?
India’s Bond Default Hall of Shame
| Entity | Rating Before Default | Amount at Risk | Recovery | Year |
|---|---|---|---|---|
| IL&FS | AAA | Rs 91,000 Cr | Ongoing (6+ years) | 2018 |
| DHFL | AAA | Rs 1 lakh Cr+ | ~43% | 2019 |
| Reliance Home Finance | A+ | Rs 7,000 Cr+ | Minimal | 2019 |
| TruCap Finance | A- | Rs 55 Cr (retail via OBPPs) | Pending | 2025 |
| Reliance Commercial Finance | A | Rs 3,000 Cr+ | Minimal | 2019 |
What these defaults teach you:
-
Credit ratings fail exactly when you need them most. IL&FS and DHFL were rated AAA by multiple agencies right up until they collapsed. Rating agencies have faced zero meaningful consequences.
-
Recovery takes years and is never 100%. DHFL bondholders waited over 4 years through NCLT proceedings and recovered approximately 43 paise per rupee. IL&FS resolution is still ongoing after 6+ years.
-
Platform listing is not a safety endorsement. TruCap bonds were sold through SEBI-registered OBPPs. GoldenPi and Grip Invest both listed them. Wint Wealth refused to list them — that single decision separated platforms that protected investors from those that did not.
For a deeper look at what happens when corporate debt defaults, read DHFL FD default — what investors lost and why AAA does not mean safe.
The rule: Never put more than 5% of your bond allocation in a single corporate issuer. If you cannot diversify across 20+ issuers, buy a debt mutual fund or stick to government securities.
Who Should Buy What: A Decision Framework
If Your Bond Allocation Is Under Rs 5 Lakh
Stick to government securities and debt mutual funds.
- Open RBI Retail Direct, buy G-Secs or set up a T-Bill SIP
- If you want corporate bond exposure, use a direct-plan corporate bond fund (ICICI Pru Corporate Bond, Axis Corporate Bond — both have 80%+ AAA allocation)
- Do not buy individual corporate bonds — you cannot diversify meaningfully at this allocation size
If Your Bond Allocation Is Rs 5–25 Lakh
Mix government securities with selective corporate bonds.
- 60–70% in G-Secs and T-Bills via RBI Retail Direct (zero cost, zero credit risk)
- 20–30% in AAA/AA+ corporate bonds via OBPPs or exchanges (no single issuer >5% of total bond allocation)
- 10% in Bharat Bond ETF for diversified PSU bond exposure
- Consider tax-free bonds on the secondary market if you are in the 30% bracket
If Your Bond Allocation Is Rs 25 Lakh+
Full spectrum approach with tax optimization.
- Core (50%): G-Secs via RBI Retail Direct, held to maturity
- Satellite (25%): Listed corporate bonds (AA+ and above), bought for 12.5% LTCG advantage over debt MFs
- Tactical (15%): Tax-free bonds on secondary market (5.5% tax-free = 7.86% pre-tax at 30% bracket)
- Liquidity buffer (10%): T-Bill SIP via RBI Retail Direct or liquid fund
For comparing T-Bills versus longer-duration government bonds, read Treasury Bills vs government bonds — which to buy.
10 Common Mistakes Bond Investors Make
1. Chasing yield without reading the credit rating rationale. A 12% yield on an A-rated NBFC bond is not “high return” — it is the market pricing in default risk. Read the rating rationale document, not just the letter grade.
2. Confusing coupon rate with yield to maturity. If you buy a bond at Rs 1,050 with a 9% coupon (Rs 90/year) maturing in 3 years at Rs 1,000, your YTM is approximately 7.3% — not 9%. OBPPs sometimes display coupon rates prominently and YTM in fine print.
3. Ignoring the call option. Many high-yield corporate bonds have embedded call options. The issuer can redeem the bond early (typically when rates fall), ending your high-yield income exactly when you need it most. Always check for call/put options in the ISIN details.
4. Not checking listing status before buying. Listed bonds get 12.5% LTCG after just 12 months. Unlisted bonds need 24 months. That 12-month difference matters — verify on the NSE/BSE debt segment before purchasing.
5. Buying tax-free bonds without calculating YTM. Tax-free bonds trade at 15–20% premium over face value. A bond with a 7.35% coupon bought at Rs 1,180 (18% premium) with 8 years to maturity has a YTM of approximately 5.3% — not 7.35%. The coupon rate is irrelevant; only YTM matters.
6. Treating OBPPs as advisors. SEBI registers OBPPs as intermediaries, not advisors. Their revenue comes from issuers, not investors. They have an incentive to list more bonds, not better bonds. Wint Wealth’s co-investment model partially aligns incentives, but no platform is a fiduciary.
7. Ignoring concentration risk. Buying Rs 5 lakh of a single AA-rated NBFC bond is a 100% loss if that NBFC defaults. The same Rs 5 lakh in a corporate bond fund is spread across 30–50 issuers. Diversification is not optional in credit markets.
8. Expecting secondary market liquidity. Corporate bond secondary market turnover in India is 0.3x — most bonds trade almost never after initial placement. If you might need the money before maturity, buy a debt mutual fund instead of a direct bond.
9. Forgetting TDS on corporate bond interest. 10% TDS is deducted when annual interest exceeds Rs 10,000 from a single issuer. You can claim this back while filing ITR, but your cash flow is reduced in the interim. G-Secs have no TDS — another advantage.
10. Comparing pre-tax bond yields with post-tax FD returns. A 9% corporate bond at the 30% bracket yields 6.3% post-tax. A 7.5% bank FD yields 5.25% post-tax. The gap is only 105 basis points — and the FD carries DICGC insurance up to Rs 5 lakh with zero credit risk. Make sure the extra yield justifies the extra risk.
The Settlement and Demat Basics
All bonds in India are held in demat form via NSDL or CDSL — the same depositories that hold your shares. Settlement is T+1 for both corporate bonds and G-Secs.
What happens when you buy a bond:
- You pay the purchase price (face value + accrued interest for secondary market purchases)
- Bond credits to your demat account on T+1
- Interest payments credit directly to your bank account on coupon dates
- On maturity, face value credits to your bank account
Accrued interest: If you buy a bond in the secondary market between coupon dates, you pay the seller for interest accrued since the last coupon. This is not extra cost — you recover it on the next coupon payment. But it does increase your upfront outflow.
The Bottom Line
The Indian bond market went from being institutional-only (Rs 10 lakh minimum) to retail-accessible (Rs 10,000 minimum) in just two years. RBI Retail Direct gives you government securities at zero cost. SEBI-registered OBPPs give you corporate bonds with a few clicks. T-Bill SIPs now let you automate risk-free fixed-income investing.
But access is not the same as understanding.
The platform that charges zero fees makes money from the spread it does not disclose. The bond rated AAA can default and destroy your capital. The 11% yield becomes 7.4% after tax at the 30% bracket. The secondary market that theoretically exists has near-zero liquidity for retail sellers.
Start with RBI Retail Direct. Get comfortable with G-Secs and T-Bills — zero credit risk, zero cost, and yields that beat most bank FDs. Only move to corporate bonds after you understand credit risk, have enough capital to diversify across multiple issuers, and are prepared to hold every bond to maturity.
The best bond investment is the one where you get your money back.
Disclaimer: This article is for educational purposes only. Bond prices and yields change daily. Past ratings and yields do not guarantee future performance. Verify all data points with official sources (RBI, SEBI, NSE, BSE) before making investment decisions. HonestMoney.in does not sell or recommend any specific bonds or platforms.