Indians Cannot Buy US Treasury Bonds Directly. TreasuryDirect.gov Requires a US Social Security Number. Here Are the 4 Routes That Actually Work — With the Real Cost Per Rs 10 Lakh Invested.
US Treasury bonds yield 4.2-4.6% in 2026. That is a risk-free return in the world’s reserve currency — the US government has never defaulted in 235+ years. For Indian investors, this represents genuine portfolio diversification: dollar-denominated, zero-credit-risk, and uncorrelated with Indian fixed income.
But the path from an Indian bank account to a US Treasury bond is littered with forex markups, TCS deductions, platform fees, and tax complications that most “invest in US” articles conveniently ignore.
This guide covers every route, every cost, and the honest math on whether US Treasuries make sense for your portfolio — or whether Indian G-Secs at 7.0% are simply the better deal.
Why Indian Investors Want US Treasuries
Three legitimate reasons — and one bad one:
1. USD Hedge. If you have future dollar liabilities — child’s foreign education (USD 50,000-80,000/year), planned emigration, or foreign property purchase — holding US Treasuries is a natural hedge. You earn yield while your dollars wait.
2. Portfolio Diversification. Indian fixed income is 100% correlated with Indian macro conditions — RBI rate decisions, fiscal deficit, rupee trajectory. US Treasuries move on different factors (Fed policy, US inflation). Adding 10-15% US Treasuries to a debt portfolio reduces single-country risk.
3. INR Depreciation Kicker. The rupee has depreciated from Rs 67/USD in 2016 to Rs 84/USD in 2026 — a CAGR of approximately 2.3%. A US Treasury yielding 4.5% in USD has historically delivered 6.5-7.0% in INR terms after currency depreciation. This is not guaranteed, but the structural trend has persisted for decades.
The bad reason: “US Treasuries are safer than Indian G-Secs.” Indian sovereign bonds are rated BBB- by S&P, while US Treasuries are AA+. But India has never defaulted on rupee-denominated domestic debt. For an Indian investor with rupee liabilities, Indian G-Secs carry zero practical default risk. Going to US Treasuries for “safety” while paying forex costs and accepting currency risk is backwards logic.
Current US Treasury Yields (May 2026)
| Instrument | Maturity | Yield | Risk Level |
|---|---|---|---|
| 1-Month T-Bill | 30 days | 5.0% | Near zero |
| 3-Month T-Bill | 91 days | 4.8% | Near zero |
| 6-Month T-Bill | 182 days | 4.6% | Near zero |
| 1-Year T-Bill | 364 days | 4.5% | Near zero |
| 2-Year Note | 2 years | 4.3% | Low |
| 5-Year Note | 5 years | 4.1% | Moderate |
| 10-Year Note | 10 years | 4.3% | Moderate-High |
| 20-Year Bond | 20 years | 4.6% | High |
| 30-Year Bond | 30 years | 4.5% | Very High |
The US yield curve is relatively flat in 2026 — short-term T-Bills yield nearly as much as long-term bonds. This means there is almost no compensation for taking duration risk. For most Indian investors, short-duration exposure (1-2 year T-Bills) offers the best risk-reward.
Route 1: Indian Fintech Platforms — The Simplest LRS Route
Platforms like INDmoney, Vested, Winvesta, and Stockal let you buy US-listed ETFs (including Treasury ETFs) through their partner US broker-dealers via the LRS route.
Platform Comparison
| Feature | INDmoney | Vested | Winvesta | Stockal |
|---|---|---|---|---|
| US Broker Partner | DriveWealth | DriveWealth | DriveWealth | DriveWealth |
| Account Opening | Free | Free | Free | Free |
| Platform Fee | Free | Free | Rs 0-99/month | Rs 99/month |
| Forex Markup | 0.5-1.5% | 0.5-1.0% | 0.5-1.0% | 0.5-1.5% |
| Min Investment | Rs 100 (fractional) | Rs 1 (fractional) | USD 1 | USD 1 |
| Fractional Shares | Yes | Yes | Yes | Yes |
| W-8BEN Filing | Automatic | Automatic | Automatic | Manual |
| SIPC Insurance | Up to USD 500,000 | Up to USD 500,000 | Up to USD 500,000 | Up to USD 500,000 |
How It Works
- Open account on the app (KYC with PAN + Aadhaar)
- Add money in INR — platform converts to USD via banking partner
- Search for US Treasury ETFs (SHV, TLT, IEF, GOVT, BIL)
- Buy fractional or full shares
- Platform handles LRS paperwork with your bank
The Hidden Cost: Forex Markup
The forex markup is the real cost on these platforms. A 1% forex markup on Rs 10 lakh is Rs 10,000 — gone before you earn a single rupee of yield. This markup applies both when you buy (INR to USD) and when you sell (USD to INR), doubling the effective cost for a round trip.
Cost on Rs 10 lakh invested via INDmoney:
| Cost Component | Amount |
|---|---|
| Forex markup (1% buy side) | Rs 10,000 |
| Platform fee | Rs 0 |
| ETF expense ratio (0.15%/year) | Rs 1,500/year |
| TCS above Rs 7 lakh (20% on Rs 3 lakh) | Rs 60,000 (refundable) |
| Forex markup on withdrawal (1%) | Rs 10,000+ |
| Total first-year cost (excluding TCS) | Rs 21,500 |
At a 4.5% USD yield on Rs 10 lakh, your gross return is approximately Rs 45,000. After Rs 21,500 in costs, you keep Rs 23,500 — an effective yield of 2.35% before tax. The forex markup eats nearly half your return.
Route 2: Interactive Brokers — The Cheapest Route
Interactive Brokers (IBKR) is a SEBI-registered broker (NSE/BSE member through IBKR India) that gives you direct access to the US bond market. Unlike Indian fintech platforms, IBKR lets you buy individual US Treasury bills and bonds — not just ETFs.
Why IBKR Is Cheaper
| Cost Component | IBKR | Indian Fintech |
|---|---|---|
| Forex markup | 0.002-0.01% | 0.5-1.5% |
| Bond commission | 0.002% of face value (min USD 5) | N/A (ETFs only) |
| ETF commission | USD 0.0035/share (min USD 0.35) | Free |
| Platform fee | USD 0/month | Rs 0-99/month |
| Account minimum | USD 0 | USD 0 |
Step-by-Step: Buying US T-Bills on IBKR
- Open IBKR account at interactivebrokers.com — select India as country, provide PAN, Aadhaar, bank details. Account approval takes 1-3 business days.
- Fund via wire transfer from your Indian bank (LRS route). Your bank charges Rs 500-1,500 for international wire. IBKR charges no deposit fee.
- Navigate to Bond Scanner — search for US Treasury securities by maturity, yield, and type.
- Buy individual T-Bills — minimum face value USD 1,000. A 6-month T-Bill at 4.6% yield costs approximately USD 977 and returns USD 1,000 at maturity.
- Or buy Treasury ETFs — SHV, TLT, IEF, GOVT at near-zero commission.
Cost on Rs 10 lakh Invested via IBKR
| Cost Component | Amount |
|---|---|
| Bank wire transfer fee | Rs 1,000 |
| Forex conversion (0.01% IBKR rate) | Rs 100 |
| Bond commission (0.002% on USD 12,000) | Rs 21 (min USD 5 = Rs 420) |
| TCS above Rs 7 lakh (20% on Rs 3 lakh) | Rs 60,000 (refundable) |
| Total first-year cost (excluding TCS) | Rs 1,520 |
Compared to Rs 21,500 on Indian fintech platforms, IBKR saves you Rs 20,000 on Rs 10 lakh — that is 2 percentage points of yield preserved. On Rs 50 lakh, the saving is Rs 1 lakh+.
The trade-off: IBKR’s interface is not beginner-friendly. Bond trading requires understanding yield, duration, and settlement mechanics. For investors comfortable with a professional trading platform, IBKR is the clear winner.
Route 3: Indian Mutual Fund Feeder Funds — No LRS, No Forex, No TCS
For investors who want US Treasury exposure without any of the cross-border complications, Indian AMCs offer feeder funds that invest in US Treasury ETFs.
Available Feeder Funds
| Fund | Underlying ETF | Expense Ratio (TER) | Min SIP | AUM |
|---|---|---|---|---|
| Bandhan US Treasury Bond 0-1 Year FoF | Short-term US Treasuries | 0.30-0.40% | Rs 1,000 | Rs 50-100 Cr |
| DSP US Treasury FoF | Medium-term US Treasuries | 0.35-0.50% | Rs 500 | Rs 30-60 Cr |
Advantages
- No LRS paperwork — invest in INR like any mutual fund
- No TCS — domestic mutual fund, not a foreign remittance
- No forex management — the fund handles currency conversion
- SIP available — Rs 500-1,000 minimum, systematic deployment
- Single demat/folio — integrates with your existing MF portfolio
Disadvantages
- TER drag — 0.30-0.50% annually versus 0.05% for directly buying GOVT ETF
- Tracking error — 0.3-0.8% deviation from underlying ETF performance
- Tax — gains taxed at slab rate regardless of holding period (no LTCG benefit)
- Currency hedging costs — embedded in NAV, not transparent
- Limited AUM — small fund size means potential liquidity issues
The Math: Feeder Fund vs Direct ETF
On Rs 10 lakh invested for 3 years at 4.5% USD yield:
| Parameter | Direct via IBKR | Feeder Fund |
|---|---|---|
| Gross USD yield | 4.5% | 4.5% |
| Expense ratio drag | 0.05% (ETF only) | 0.40% (FoF + underlying) |
| Tracking error | 0% (individual bonds) | 0.5% |
| Net USD yield | 4.45% | 3.60% |
| Forex cost (one-time) | 0.01% | Embedded (~0.3%) |
| Effective annual yield | ~4.4% | ~3.3% |
| Tax treatment | Slab rate | Slab rate |
The feeder fund costs you approximately 1.1% per year in total drag. On Rs 10 lakh over 3 years, that is Rs 33,000 in lost returns. For investments below Rs 5 lakh, the convenience justifies this cost. Above Rs 10 lakh, the direct route via IBKR is clearly better.
Route 4: The NRI Route (For NRIs with US Bank Accounts)
NRIs with a valid US Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) and a US bank account can buy directly on TreasuryDirect.gov — the cheapest possible route with zero commissions and zero forex markup (since you are already holding USD).
NRIs can also use any US brokerage (Schwab, Fidelity, Vanguard) with zero-commission Treasury ETF trades. This is the simplest, cheapest route — but only available if you have a US banking and tax presence.
For NRIs routing money from NRE/NRO accounts: The LRS limits do not apply to NRIs. Repatriation rules for NRO accounts (USD 1 million per year) may apply depending on the source of funds.
The Real Cost Breakdown: Rs 10 Lakh Invested via Each Route
| Cost Component | IBKR (Direct) | INDmoney | Feeder Fund | NRI (TreasuryDirect) |
|---|---|---|---|---|
| Forex markup | Rs 100 | Rs 10,000 | Embedded | Rs 0 |
| Platform/brokerage | Rs 420 | Rs 0 | Rs 0 | Rs 0 |
| Wire transfer fee | Rs 1,000 | Rs 0 | Rs 0 | Rs 0 |
| TER (annual) | Rs 500 | Rs 1,500 | Rs 4,000 | Rs 0 |
| TCS (refundable) | Rs 60,000 | Rs 60,000 | Rs 0 | N/A |
| Tracking error (annual) | Rs 0 | Rs 0 | Rs 5,000 | Rs 0 |
| Year 1 Total (ex-TCS) | Rs 2,020 | Rs 11,500 | Rs 9,000 | Rs 0 |
| 3-Year Total (ex-TCS) | Rs 3,020 | Rs 14,500 | Rs 27,000 | Rs 0 |
Winner: IBKR for large investments (Rs 5 lakh+). Feeder funds for small, systematic investments (Rs 1,000-5,000/month SIP). Indian fintech platforms sit uncomfortably in between — higher cost than IBKR without the simplicity of feeder funds.
Tax Treatment: The Complete Picture
| Event | Tax in India | Tax in US | Net Effect |
|---|---|---|---|
| Capital gain on US ETF (any holding period) | Slab rate (up to 31.2%) | None | Full slab rate |
| Capital gain on individual US T-Bill (held to maturity) | Slab rate | None | Full slab rate |
| Dividend from US Treasury ETF | Slab rate | 25% WHT (15% with W-8BEN) | 15% US + differential India (Section 91 credit) |
| Interest on individual US Treasury bond | Slab rate | None (exempt under US-India treaty) | Full slab rate |
| Capital gain on Indian feeder fund | Slab rate | None | Full slab rate |
Key Tax Takeaways
- No LTCG benefit. Unlike Indian G-Secs that get 12.5% flat LTCG after 12 months, US Treasury gains are always taxed at your slab rate. At the 30% bracket, this is a 18.7 percentage point disadvantage.
- File W-8BEN. Without it, 30% US withholding on ETF dividends. With it, 15%. This form takes 2 minutes on IBKR.
- Claim DTAA credit. The 15% US tax paid on dividends is claimable under Section 91 of the Income Tax Act. Do not pay double tax.
- TCS is not a tax — it is an advance. The Rs 60,000 TCS on Rs 10 lakh investment is refundable when you file ITR. Claim it.
Post-Tax Yield Comparison: US Treasury vs Indian G-Sec
| Tax Bracket | US Treasury (4.5% pre-tax) | Indian 10Y G-Sec (7.0% pre-tax, LTCG) |
|---|---|---|
| 0% (below exemption) | 4.5% | 7.0% |
| 5% + cess | 4.27% | 6.65% (coupon) / 6.13% (LTCG component) |
| 20% + cess | 3.56% | 5.55% (coupon) / 6.13% (LTCG component) |
| 30% + cess | 3.10% | 4.85% (coupon) / 6.13% (LTCG component) |
At every tax bracket, Indian G-Secs beat US Treasuries on pure yield. The case for US Treasuries is diversification and currency hedge — not yield.
Currency Risk: The Elephant in the Room
The USD/INR exchange rate can make or break your US Treasury returns in rupee terms.
Historical INR Depreciation Against USD
| Period | INR/USD Start | INR/USD End | Annual Depreciation |
|---|---|---|---|
| 2016-2021 (5 years) | 67.2 | 74.3 | 2.0% |
| 2021-2026 (5 years) | 74.3 | 84.0 | 2.5% |
| 2016-2026 (10 years) | 67.2 | 84.0 | 2.3% |
| 2011-2026 (15 years) | 45.0 | 84.0 | 4.2% |
Over the last 10 years, the rupee depreciated at 2.3% annually — adding 2.3% to USD returns in INR terms. A US Treasury yielding 4.5% in USD delivered approximately 6.8% in INR.
But this is an average. In individual years:
- 2017: INR appreciated 6% against USD — a US Treasury yielding 2.3% delivered negative returns in INR
- 2018: INR depreciated 9% — a US Treasury yielding 2.8% delivered 11.8% in INR
- 2020: INR depreciated 3% — roughly in line with the long-term average
Currency risk is not diversification — it is volatility. If you need the money in rupees within 1-2 years, currency swings can wipe out your yield. US Treasuries work as a currency hedge only if your liabilities are also in dollars or your horizon is 5+ years.
When US Treasuries Make Sense (and When They Don’t)
Buy US Treasuries If:
- You have USD-denominated future expenses — child’s US/UK university fees, planned emigration, foreign property
- You want to diversify beyond India — your entire portfolio is in Indian equities, debt, and real estate
- You are building a multi-currency retirement corpus where 10-15% in USD fixed income reduces country risk
- The INR is at a cyclical strong point (making USD cheaper to buy)
Skip US Treasuries If:
- You are purely yield-seeking — Indian G-Secs at 7.0%, FDs at 6.25-6.40%, SCSS at 8.0% all beat US Treasuries pre-tax and post-tax
- Your investment is below Rs 5 lakh — the fixed costs (wire fees, TCS cash flow impact) eat disproportionately into returns
- You need LTCG tax benefit — Indian G-Secs get 12.5% flat after 12 months, US securities do not
- You want simplicity — RBI Retail Direct lets you buy Indian T-Bills and G-Secs with zero friction
Popular US Treasury ETFs: Quick Reference
| ETF | Issuer | Duration Focus | Expense Ratio | Yield (Approx.) | Best For |
|---|---|---|---|---|---|
| SHV | iShares | 0-1 Year | 0.15% | 4.8% | Parking cash in USD |
| BIL | SPDR | 1-3 Month | 0.14% | 4.9% | Ultra-short exposure |
| SHY | iShares | 1-3 Year | 0.15% | 4.3% | Short-term allocation |
| IEF | iShares | 7-10 Year | 0.15% | 4.2% | Medium duration |
| TLT | iShares | 20+ Year | 0.15% | 4.5% | Rate cut bet |
| GOVT | iShares | All maturities | 0.05% | 4.3% | Broad, low-cost exposure |
| BND | Vanguard | Total Bond Market | 0.03% | 4.6% | Includes corporates + treasuries |
| VGSH | Vanguard | 1-3 Year | 0.04% | 4.3% | Low-cost short-term |
For most Indian investors, GOVT (0.05% TER, all maturities) or SHV (0.15% TER, very short term) are the sensible defaults. TLT is a speculative bet on US interest rate cuts — not a fixed income allocation.
Bottom Line
US Treasury bonds yield 4.2-4.6% risk-free in USD. After forex costs, platform fees, and Indian taxes at slab rate, the net return for an Indian investor ranges from 2.5% (worst case via expensive fintech) to 4.0% (best case via IBKR).
Meanwhile, Indian G-Secs yield 7.0% with zero forex risk, zero TCS, zero platform fees, and 12.5% flat LTCG tax — delivering 4.85-6.13% post-tax at the 30% bracket.
The math is clear: US Treasuries are a diversification tool, not a yield play. Allocate 10-15% of your debt portfolio to US Treasuries if you have genuine USD needs or want multi-currency exposure. For pure income and safety, Indian sovereign bonds bought via RBI Retail Direct remain the better deal by a wide margin.
If you do go ahead, use Interactive Brokers for amounts above Rs 5 lakh and Indian feeder funds for systematic small investments. The Indian fintech route is the most expensive option for the least additional functionality.
No one selling you a “US stocks and bonds” app will tell you this. We just did.
LRS limits, TCS rates, and tax rules are as per the Finance Act 2025 and RBI Master Direction on LRS. US Treasury yields are indicative as of May 2026. Currency projections are based on historical data and do not constitute forward-looking guarantees. Consult a chartered accountant for personalized tax advice on cross-border investments.