Non-resident Indians have multiple choices in opening and operating a Bank Account overseas. The most popular banking facilities are the Non-Resident External (NRE) Account, the Non-Resident Ordinary (NRO) Account, and the Foreign Currency Non-Resident Deposit (FCNR) Account. While the NRE and FCNR Accounts hold funds in foreign currency, the NRO Account is a rupee account.
Bank FDs have attracted millions of investors in India and worldwide, and the participation of NRIs in opening an NRI Deposit is no exception. They offer higher interest and returns on the principal amount for a pre-determined tenure. The following are its types:
NRO FDs
NRO FDs are suitable for NRIs having regular income flowing from India. It could be in rent, commissions, fees, etc. Since it is a rupee account, principal repatriation is prohibited, but the interest amount is transferrable abroad, subject to a limit. You can open an NRO FD Account jointly with Indian residents. The interest rates are also attractive compared to Savings and Current Bank Accounts.
The interest amount is taxable in this NRI FD Account at the peak rates. They also attract an additional surcharge of 10% if the interest earned in a particular financial year is more than INR 10 lakh.
NRE FDs
NRE FDs are foreign currency accounts that are freely repatriable. Unlike the FCNR Deposits in USD, GBP, EUR, and JPY, the NRE Deposit Account only holds funds in INR. However, the earned money should be out of India. They are suitable for NRIs who prefer a reparable fund source and a secure investment. These deposits are available in flexible tenures from one year to 10 years. Banks even offer Loans and Overdraft facilities against them.
FCNR Deposit
An FCNR Deposit Account is a type of NRI Fixed Deposit Account for foreign currency. It allows NRIs to earn tax-free interest. You stay protected against forex rate fluctuations as your investment grows in the same currency. Plus, you get competitive rates, the income earned is tax-free, and you can freely repatriate funds to your country of residence.
How to select?
The interest in NRE FDs varies slightly but is more standardised than the range of NRO FDs. Being NRE Deposits, the interest earned is entirely tax-free in the hands of the depositor. The choice and type of NRI FD depend on the exact requirements and whether you are looking to earn rupee flows in India or just foreign flows. It also depends on whether you prefer a repatriable or a non-repatriable account for your savings.
Conclusion
These FDs have their merits. Their interest is attractive compared to other Savings Accounts, making them lucrative for NRIs. The rates differ between banks. Ensure to inquire about the same before opening the account. You save time, travel, paperwork, and frequent bank visits if they offer online opening facilities.
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