The Different Fixed Deposit Options Available To NRIs

The Different Fixed Deposit Options Available To NRIs

NRIs cannot open ‘normal’ Fixed Deposit accounts in India. However, they can invest in special Fixed Deposit specifically designed for Non-Resident Indians.

Fixed Deposit accounts are easy to create and maintain. They are relatively liquid, and offer assured returns. Fixed Deposit accounts are a standard savings options for Indian citizens. However, are these saving schemes available for NRIs and PIOs?

Definition of NRI and PIO

For tax purposes, any Indian who spends less than 182 days in a calendar year in India is an NRI. A PIO or Person of Indian Origin is someone who is not from Pakistan, Bangladesh, Nepal, Bhutan, Afghanistan or Sri Lanka and:

  • Is not an Indian citizen

  • Has previously held an Indian Passport, or

  • Has parents or grandparents of Indian origin

An NRI is an Indian citizen living abroad, while a PIO is a foreign citizen of Indian Origin. For the purpose of this article, PIOs and NRIs are all clubbed under NRI.

NRI/NRO Bank Fixed/Term Deposit

NRIs can open three types of Fixed Deposit accounts in India:

  • NRE Fixed Deposit

  • NRO Fixed Deposit

  • FCNR Fixed Deposit

NRE and NRO are both deposits held in Rupee denomination, while FCNR deposits are held in foreign currencies. Check out Fixed Deposit rates on NRE/NRO accounts offered by various banks.

Non-Resident External (NRE) Fixed Deposits

NRE FDs are Fixed Deposit accounts held in Indian rupees. NRE accounts are typically created to hold income earned in another country. NRIs can transfer funds in other currencies to their NRE account. The amount will be converted to INR when it is deposited in the NRE account as these accounts are rupee denominated.

Non-Resident Ordinary (NRO) Fixed Deposit

NRO FDs are created to hold funds that have been earned in India. You cannot remit funds from abroad directly to an NRO account. NRIs who have income sources in India like rental income, income from investments in India etc., can open NRO accounts.

Difference Between NRE and NRO Deposits

  • NRE accounts can be funded through remittance from another country, or through depositing traveler’s cheques, or by depositing foreign currency at the bank

  • NRO accounts can only be funded in INR and only through money earned in India

  • You can transfer funds from one NRE account to another

  • You can also transfer funds from an NRE account to open an NRO account

  • NRO account funds cannot be used to make deposits in NRE accounts

  • NRE accounts can be held jointly between two NRIs, but not between one NRI and one resident Indian

  • NRO accounts can be held jointly between one NRI and a Resident Indian

  • NRE account can be affected by daily fluctuations in the value of Indian Rupee as well as conversion rate when repatriating

  • NRO accounts are not subject to daily fluctuation in the value of the Indian Rupee

  • All the funds in an NRE account, the principal as well as interest earned can be repatriated easily to another country

  • In NRO account, the interest earnings can be repatriated, but the repatriation of the principal amount is subject to regulations

  • NRE account hold funds from foreign earnings, so neither the principal nor the interest earned is taxable in India. to avoid Double Taxation

  • NRO account holds funds earned in India, so interest earned on these deposits are subject to taxation at around 30%. However, reduced tax benefits can be availed under the Double Taxation Avoidance Agreement (DTAA)

Open NRI Deposit Accounts

Depending on whether you want to save foreign or Indian origin funds, check out NRE Fixed Deposit rates or NRO Fixed Deposit interest rates. Choose the bank that offers the best terms.

Want to save funds from the country where you earn your income? Do an NRE Fixed Deposit rates comparison and find the best NRE FD schemes on offer. You can also open an FCNR account if you want to hold the funds in foreign currency.

Prakash is a student of MassCom, and blogs on Topics that fascinates him the Most.

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