A Beginners Guide to NRI Fixed Deposits

Fixed Deposits or FDs are an excellent investment option not just for resident Indians but NRIs too. Check out this post to know some of the most important things every NRI should know before opening a new FD account.

India has the largest number of its citizens working in different parts of the world. Due to this, the country is also the top global remittance recipient. In 2018, the Indian diaspora sent more than US$ 80 billion back home.

Most NRIs that send funds to their home country prefer parking it in a bank account like an NRE account. But for NRIs who don’t need their savings for a considerable duration, Fixed Deposits (FDs) can also be an excellent choice. Take a look at some of the most important things NRIs should know before opening an FD account-

  1. Type of FD Account

Fixed Deposit for NRIs is an umbrella term for many different types of FD accounts that are available for Non-Resident Indians. Some of the top options include-

  • NRE (Non-Resident External) FD
  • NRO (Non-Resident Ordinary) FD
  • FCNR (Foreign Currency Non-Resident) FD
  • RFC (Resident Foreign Currency) FD

All of these different FD accounts are ideal in different scenarios. For instance, NRE FD is a preferred option for NRIs who want to open a term deposit account with their foreign earnings. NRO FD, on the other hand, is ideal for NRIs looking for a term deposit account for their Indian earnings.

  1. Interest Rate

The interest rate can also vary based on the type of NRI deposit, tenure, and bank you select. In the past, the interest rate offered on NRI deposits used to be considerably lower than the interest offered to resident Indians. But things have changed significantly over the years.

The NRI FD interest rate of some of the top banks in India is now as high as the FD rate offered to resident Indians. But make sure that you do compare the interest rate of at least a few reputed banks before making a decision.

  1. NRI Fixed Deposit Taxation

NRIs should also thoroughly understand the taxation of FD accounts to ensure that taxes do not eat up a considerable portion of their profits. The taxation of FD for NRIs depends on the type of deposit selected.

For instance, interest earned from an NRE FD account is tax-free in India. But NRO FD is subject to TDS (Tax Deducted at Source). However, even in the case of NRO FD, NRIs can reduce their tax liability by taking advantage of DTAA (Double Taxation Avoidance Agreement) if they are currently in a country with which India has this agreement.

  1. Repatriability of Funds

Is it possible to transfer funds from an NRI Fixed Deposit account to a foreign country? Yes, with most FD accounts, like NRE FD, FCNR FD, and RFC FD, the principal, as well as the interest amount, is fully repatriable.

However, if you open an NRO FD account, only the interest earned in the financial year is fully repatriable after deducting applicable TDS. The principal amount can only be transferred up to US$ 1 million per year for bonafide purposes.

Is an NRI FD Account Right for You?

NRIs looking to earn higher risk-free returns on their savings should consider opening an FD account in India. With so many different types of deposit accounts to choose from, competitive interest rate, favourable tax rules, and easy repatriability, FD is one of the most rewarding and hassle-free investment options for NRIs.

Look for a top Indian bank to know more about all the different types of FD accounts for NRIs to select one that best suits your requirements and investment objectives.

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