How to Buy Government Securities: 3 Routes Compared (2026)

Many people keep savings in bank fixed deposits. You've likely heard that government securities are safer. They're backed by the Government of India. But knowing they exist and knowing how to buy government securities are two different things. This guide shows you how to buy them and helps you pick the best route.

Key Takeaways

Government securities come in three forms: T-Bills (short-term), Dated G-Secs (long-term with payments twice per year), and State Development Loans
You can buy government securities through three routes: RBI Retail Direct (zero fees), your demat account (via broker), or Gilt mutual funds
RBI Retail Direct works best for first-time buyers seeking simplicity and lowest costs
Tax differs from bank FDs: payments face no TDS, while bank FD interest triggers TDS when annual interest exceeds Rs 40,000
When you hold government securities to maturity, you face no interest-rate risk

What Are Government Securities and Why Should You Buy Them?

A government security is a loan issued by the Government of India or a state government. When you buy one, you lend money to the government. The government promises to return your money plus interest at the end.

According to the Reserve Bank of India 2024, there are three main types for retail investors.

T-Bills have time periods of 91, 182, or 364 days. They're sold at a lower price than face value. You might pay Rs 99,500 for a Rs 100,000 T-Bill. At maturity you get Rs 100,000. The Rs 500 difference is your gain.

Dated Government Securities run for 5 to 40 years and pay interest twice per year. A "7.26% GOI 2029" bond pays 7.26% annual interest. This comes in two payments per year. It matures in January 2029.

State Development Loans are issued by state governments. They pay about 20 to 40 basis points more than central bonds. This reflects the state's slightly higher risk.

Retail investors buy government securities for three reasons. First, they offer steady payments. Second, they're very safe. Third, the government backs them. Under Income Tax rules 2024, the interest you earn is taxed at your rate.

Which Route Should You Use to Buy Government Securities?

You can buy government securities through three routes. Each has different costs and minimums for retail investors.

Route	Minimum Investment	Fees	KYC	Best For
RBI Retail Direct	Rs 10,000	None	Aadhaar, PAN, Bank account	First-time buyers
Broker Demat (Zerodha, HDFC)	Rs 10,000	No fees on auctions	Already done	Active traders
Gilt Mutual Fund	Rs 500-1,000	0.5-1.5% per year	Via mutual fund app	Passive investors

RBI Retail Direct started in November 2021. It lets you buy straight from the RBI. No middleman fees apply. This is best for first-timers buying government securities cheaply.

Your broker's demat account is faster if you use Zerodha or HDFC already. You bid using the app. You settle the next business day. Brokers don't charge fees on primary auctions.

Gilt mutual funds are simple. The fund manager buys government securities for you. You pay a yearly fee. This suits investors who don't want to track auctions.

For first-time buyers, RBI Retail Direct is best because it costs nothing and you always get the fair rate.

How Do You Buy Government Securities Through RBI Retail Direct?

RBI Retail Direct is simple. Here's how to buy government securities step by step:

1. Register and complete KYC

Go to the RBI Retail Direct portal. Click "New Registration." You'll need your Aadhaar (linked to your phone), PAN, and a bank account. KYC takes under 10 minutes if your Aadhaar is linked.

2. Link your bank account

Add the bank account you'll bid from. You need money in it on settlement day (the day after auction ends). Pending transfers don't count.

3. Place a non-competitive bid

RBI runs auctions every Wednesday for T-Bills. Dated Government Securities have set auction dates. When an auction opens, pick the security you want. Enter your amount (minimum Rs 10,000, maximum usually Rs 2 crore). Select "Non-Competitive Bid." Then send.

In a non-competitive bid, you don't guess rates. The RBI gives you the rate that big buyers set. You always get the fair market rate.

4. Receive allotment confirmation

Within 24 hours, RBI emails you. It shows the units you got, the rate, settlement date, and maturity date. Save this email for your records and taxes.

5. Receive payments and principal

For T-Bills, you get the full amount at maturity. For Dated Government Securities, RBI deposits your interest twice per year. Your principal comes at maturity.

How Do You Buy Government Securities Through Your Demat Account?

If you already buy stocks on Zerodha or HDFC, you can buy government securities there. Here's how on Zerodha Kite:

1. Navigate to the G-Sec section

In Zerodha Kite, click "Bids" on the left. Pick "Govt. Securities." You'll see available T-Bills, Dated Government Securities, and SDLs. Each shows its time period.

2. Place a bid

Pick the security you want. Click "Place Bid." Enter your amount (minimum Rs 10,000, maximum Rs 2 crore). Send it. Use non-competitive bidding like RBI Retail Direct.

3. Ensure funds are ready on settlement day

Your account must have money on settlement day. Not just when you bid. If you bid Monday but money arrives Tuesday, your bid may fail. Plan ahead.

4. Monitor allotment

After the auction ends, your broker tells you within 24 hours. They say if you got the securities. They show up in your account the next day.

Frequently Asked Questions

What's the difference between holding to maturity versus selling early?

If you hold to maturity, you get your full amount plus all interest with no price risk. If you sell before maturity, your sale price changes. When rates go up, prices fall. When rates fall, prices go up. First-timers should hold to maturity.

How much can I invest in one auction?

The minimum is Rs 10,000. The maximum is usually Rs 2 crore per auction. You can bid in multiple auctions to invest more.

Do I pay taxes on the interest payments?

Yes. Your interest is taxed at your tax bracket. The RBI doesn't deduct taxes upfront. Banks are different. They deduct 10% when annual interest exceeds Rs 40,000. For a 30% taxpayer, after-tax results are similar.

Can I sell before maturity?

Yes, for Dated Government Securities. You can sell on the secondary market. But it can be hard to find buyers for small amounts. Prices might be unfavorable. Hold to maturity if you want predictable results.

What's T+1 settlement and why does it matter?

T+1 means your bid settles one day after the auction ends. Your money is taken from your account. Securities are added on settlement day. This is why you need funds ready that day.

How do government securities compare to bank FDs?

Both are very safe. Government securities have government backing. Bank FDs have deposit insurance up to Rs 5 lakh per person per bank. For amounts above Rs 5 lakh, government securities are safer. After-tax returns are similar.

Can NRI investors buy government securities?

Yes, but with limits. NRIs can buy Dated Government Securities through broker accounts. They cannot use RBI Retail Direct. Ask your broker which options are available.

How do I choose between RBI Retail Direct and a broker?

For newcomers, pick RBI Retail Direct. It's simple and has no costs. If you already buy stocks, use your broker. If you trade often, use a broker platform.