Fixed deposits are a regular income source of investment and one of the oldest and safest investment instruments provided by banks. The interest rates on fixed deposits are higher than interest provided on savings or current account balances – one of the main reasons that every individual, including NRIs, prefer to diversify their investment portfolio by investing in Fixed Deposits.
A fixed deposit is known for its guaranteed returns and is ideal for NRIs who are risk-averse. Investment in fixed deposits gives NRIs an option to diversify their portfolio and increase their savings. Unlike other investment options, NRI Fixed Deposit helps them to earn guaranteed returns that are not affected by market fluctuations.
Here is all the information you need to know about fixed deposit schemes for NRIs:
There are two types of fixed deposits NRI accounts in India:
- NRO: Non-Resident Ordinary Accounts
- NRE: Non-Resident External Accounts
NRE: NRE FDs are beneficial for those who want to get their earnings which are in a foreign currency converted to the value of Indian currency. Some of the major highlights of an NRE FD account are that the interest earned is tax-free and both the principal and the interest amount are completely repatriable. Do consider that the money deposited is subject to currency rate fluctuations, and also that NRE joint accounts can only be opened with another NRI.
NRO: NRO FDs are meant primarily for income earned by NRIs in India. However, unlike NRE FDs, the interest earned through NRO FDs is taxable at a 30% rate, based on the Income Tax Act 1961. Also, only the interest earned can be completely repatriated, but the principal amount that can be repatriated is capped. The plus point is that in case of NRO fixed deposits, there are no exchange rate fluctuation risks. So, if you are staying abroad and your total income also includes earnings from India, NRO FDs bank account can be an effective gateway to manage your funds within India.
Returns: FDs are offered to non-resident Indians by many financial institutions like banks, corporates, and housing finance companies. However, the interest rate offered by corporates is generally higher than that offered by the banks. The rate of interest also depends on varying factors like the amount deposited and the tenure of the deposit. Most banks offer a current rate of interest on NRO FDs, and the rate with effect from June 16, 2020, is between 2.75% and 5.50%, depending on the maturity period, and that on NRE FDs is between 5.15% to 5.50%. However, if you get an FD with North Loop, you can earn the highest rate in the banking industry of 7.5%.
Benefits:
a. It is risk-free and guarantees fixed returns.
b. NRE Fixed Deposits are tax-free and can earn up to 7.5% return.
c. Fixed Deposit interest rates are higher than other risk-free investment instruments like Treasury Bills or Government Bonds.
d. Fixed Deposits provide a flexible tenure of investment. The investor can choose any time-period.
g. It does not depend on market fluctuations and is thus safer.
Pick your fixed deposit with the best interest rates for the best deal.
james