Fixed Deposits for NRIs: Features And Benefits

October 16, 2024

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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

Feature	NRE FD	NRO FD	FCNR(B) FD	RFC FD
Eligibility	NRIs, PIOs	NRIs, PIOs	NRIs, PIOs	Returning NRIs who have become residents
Currency	Indian Rupee	Indian Rupee	Foreign Currency (USD, GBP, EUR, etc.)	Foreign Currency
Source of Funds	Foreign earnings	Income earned in India	Foreign earnings	Foreign earnings brought back to India
Interest Taxability	Tax-free in India	Taxable in India	Tax-free in India	Taxable in India
Repatriation	Fully repatriable	Up to USD 1 million per financial year	Fully repatriable	Fully repatriable
Tenure	Generally 1-10 years	7 days to 10 years	1-5 years	Varies by bank, typically 1-3 years
Joint Account	With other NRIs/PIOs	With other NRIs/PIOs or resident Indians	With other NRIs/PIOs or resident Indians	With resident family members
Nomination	Permitted	Permitted	Permitted	Permitted
Premature Withdrawal	Allowed (with penalty)	Allowed (with penalty)	Allowed (with penalty)	Allowed (with penalty)
Loan Facility	Available	Available	Available	May be available (check with bank)
Currency Risk	Exposed to INR fluctuations	Exposed to INR fluctuations	Protected against INR fluctuations	Protected against INR fluctuations
Interest Rates	Competitive	Competitive	Linked to international benchmark rates	Linked to international rates

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.

Final Thoughts

Fixed deposits for NRIs provide a secure and lucrative investment option for those living abroad. With various types of FDs available, NRIs have multiple choices based on their specific requirements. By opening an NRI fixed deposit account, you can grow your savings while enjoying the convenience and security provided by these investments.

Additionally, you can open an NRI Savings Account with Ujjivan SFB. Our Savings Accounts for NRIs offer higher interest rates compared to traditional banks, no minimum average balance requirement, competitive exchange rates, and more.

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FAQs

1. Can I prematurely withdraw my NRI fixed deposit before the completion of the tenure?

Yes, premature withdrawal is possible for NRI fixed deposits. However, banks may charge a penalty for early withdrawals.

2. Is NRI FD tax-free?

The tax implications vary depending on the type of FD. For instance, NRE FDs are completely tax-free whereas the interest earned on NRO FDs are taxable in India..

3. Are there any tax implications with earnings from fixed deposits?

As per the Foreign Exchange Management Act (FEMA), NRIs are not allowed to hold/operate resident FDs. It's mandatory to convert resident FDs to NRI FDs once you become an NRI. Not adhering to the guideline may incur heavy penalty charges.

4. What is the maximum tenure for NRI FD?

You can open an NRI FD for a tenure of up to 10 years. Ujjivan SFB offers two types of NRI FDs - callable and non-callable. The callable NRI FD comes with a maximum tenure of 10 years and allows premature withdrawal of funds subject to terms and conditions. The non-callable FD offers higher interest rates but comes with a lock-in period of 5 years.