Even while living and working overseas, non-resident Indians may want to avail themselves of investment options in India to grow their money domestically. One such tool available to them is a Fixed Deposit. As an investment option, an FD offers potential tax benefits and significant returns while being relatively safe at the same time. NRIs can open an NRI Fixed Deposit at a bank or a Non-Banking Financial Company.
Types
Like any conventional FD, an NRI FD locks away some money for a fixed duration. This process enables depositors to earn interest on the principal sum at a fixed rate typically higher than a conventional Savings Account. The three types of FDs that NRIs can avail of in India include the following:
- A Non-Resident Ordinary or NRO FD
- A Non-Resident External or NRE Fixed Deposit
- A Foreign Currency Non-Resident Fixed Deposit Account
NRO FD
NRIs with some income source in India can open NRO FD, for example, if they earn rental income from a property in India, etc. An NRI can open this account jointly with another NRI or a resident Indian, and the interest earned on this deposit is taxable. Hence, an NRO FD enables NRIs to securely save and deposit their income in India and earn potential returns while complying with tax regulations.
NRE FD
An NRE FD allows NRIs to invest their foreign earnings and earn interest. These deposits are fully repatriable, i.e., NRIs can transfer the principal amount and interest back to the country where they live quite easily. Moreover, the interest they earn on this deposit at fixed NRI FD rates is tax-free.
When an NRI deposits their foreign currency earnings into this FD, the funds are automatically converted to Indian Rupee or INR and maintained in the same currency throughout the duration of the deposit. These accounts are becoming increasingly popular due to their full repatriation and are morphing into a convenient and profitable way for NRIs to manage their foreign earnings.
FCNR Fixed Deposit
An FCNR Deposit, or FCNR Account, enables NRIs to deposit funds in freely convertible currencies that are accepted worldwide. Banks usually permit customers to open and hold these FDs in certain permitted currencies and earn interest on the sum deposited. However, the deposits are exempt from Tax Deducted at Source in India, and the principal amount and interest earned are fully repatriable.
A crucial benefit of the FCNR Fixed Deposit is that it maintains the amount deposited as well as the interest earned in the original foreign currency.
Today, NRIs can open any of the NRI FDs mentioned online or offline and enjoy the benefit of saving and growing their money in India while continuing to live abroad.