Fixed Deposits for NRIs: Features And Benefits

As an NRI, you may be looking for secure and lucrative investment options to grow your savings. One such option is investing in Fixed Deposits specifically designed for NRIs. Such FDs offer seamless money management in India from overseas. 

However, such accounts greatly differ from each other in terms of purpose and functionalities. In this article, we have explored the various types of NRI Fixed Deposits, their benefits, eligibility criteria, rules and regulations associated with such accounts, and more. 

Types of NRI Fixed Deposits

 The four major types of NRI deposits are:

1. NRE Fixed Deposits

NRE (Non-Residential External) Fixed Deposits allow NRIs to deposit their earnings from abroad in India (the account is managed in Indian Rupees. Any foreign currency deposit is converted to Indian Rupees based on prevailing exchange rates). 

These deposits offer higher interest rates compared to Savings Account and are fully repatriable. The interest earned on such FDs is also exempt from tax in India. However, there could be tax-related obligations in the NRI's country of residence.

2. NRO Fixed Deposits

NRO (Non-Residential Ordinary) Fixed Deposits are maintained in Indian currency and are primarily used to manage income earned in India. Unlike NRE deposits, the deposit is not fully repatriable. As per FEMA rules, you can transfer up to 1 million USD in a financial year, subject to tax compliance. 

Additionally, the interest income is taxable (TDS up to 30% plus applicable surcharge and cess) as per the Income Tax Act, 1961. However, NRIs can avail tax credit in their country of residence provided the country has a DTAA (Double Taxation Avoidance Agreement) with India. 

3. FCNR (Foreign Currency Non-Repatriable) Fixed Deposits

FCNR fixed deposits are maintained in foreign currency, such as USD, GBP, JPY, Euro, CAD, SGP, or AUD. These deposits offer attractive interest rates and are fully repatriable. FCNR deposits are a good option for NRIs who want to avoid currency conversion risks.

4. RFC (Residential Foreign Currency) Deposits

RFC deposits are designed for NRIs who have returned to India permanently or plan to do so. These deposits allow you to maintain your foreign currency earnings in Indian banks. RFC accounts can be opened in USD, JPY, Euro, or GBP. 

Key Features of NRI Fixed Deposits

Benefits of NRI Fixed Deposits

Some of the benefits are: 

• Investing in an NRI Fixed Deposit is a safe and secure way to manage and grow your savings. 
• Certain NRI fixed deposits, such as NRE fixed deposits, are tax-free in India. 
• NRI FD can serve as collateral for loans and overdraft facilities. You can avail loans against your FDs, allowing you to meet your financial needs without breaking your investments.
• Most banks offer nomination facilities for NRI fixed deposits, allowing you to nominate a beneficiary who will receive the funds in case of your unfortunate demise. This ensures that your investments are protected and can be easily transferred to your loved ones.
• Fixed deposits for NRIs generally offer higher interest rates compared to regular savings accounts allowing you to maximise your savings.