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5 Things an NRI Must Know About Bank Fixed Deposits



Central banks around the globe are increasing interest rates. It is likely that now you can get better returns on fixed deposits. Hence, NRIs looking for fixed-income investment options can start exploring fixed deposits. NRIs working in countries like the US, Australia, UK, etc get a much higher return on fixed deposits in India than in the developed nations. However, one needs to keep in the negative impact of rupee depreciation. If you plan to open a fixed deposit account in India as an NRI, you need to know a few things.

Types of Fixed Deposits accounts

A fixed deposit is a reliable and risk-free investment option. You can choose one of the below options while opening a fixed deposit account:

  • Non-Resident External (NRE) Deposit: The deposit is rupee denominated in the NRE deposit. The advantage of opening an NRE account is both the principal amount and the interest earned are tax-free. Another advantage is that you can repatriate your funds in any available foreign currency easily. Compared to traditional fixed deposits, the interest rate offered under NRE deposits is higher in some cases.
  • Non-Resident Ordinary (NRO) Deposit: If you have earnings in India, you can open a fixed deposit account under NRO deposits and invest your earnings from India. The interest earned is taxable as per IT laws.
  • FCNR Fixed Deposits: A Foreign Currency Non-Repatriable(FCNR) deposit allows you to deposit your money in foreign currencies that are accepted all over the world.

Eligibility Criteria For NRIs to Open Fixed Deposits

You will have to share the below details with the bank:

  • Visa/Work Permit: You need to present the visa documents that contain your work permit. Banks, in some cases, may ask for other employment-related documents.
  • Passport: Your passport needs to show for name, address, DOB, etc.

5 things to know before opening a fixed deposit account

Below are the top five essential points to know:

1. Fixed deposit interest rate: Different banks offer different interest rates based on the credit rating of the bank. The first point you need to know is the interest rate offered by banks. Opt for a bank that gives you a competitive interest rate. The rates will vary depending on your investment amount and tenure. While you choose the bank, ideally look for one with a credit rating above AA. The bank providing the highest interest rate could also have a higher risk of default. It requires some level of expertise to choose the best combination.

2. Repatriation of Funds: Repatriation allows you to transfer money earned overseas back to the country where you are based. NRE deposits allow unlimited repatriation. In most cases, both the principal and interest amount is available for repatriation. NRO fixed deposit accounts only let you repatriate a stipulated amount in the financial year, along with some increased documentation.

3. Tenure: As mentioned above, tenure is one of the crucial parameters to consider when opening a fixed deposit account. Unlike traditional FD accounts, the minimum period of an NRE fixed deposit account is one year. Usually, the longer the tenure, the higher the interest rate offered by the bank. However, a high FD duration is not always advisable. If interest rates are likely to go up, it is advisable to use shorter-duration FD accounts.

4. Should be in line with your financial goal: Before opening an NRI fixed deposit account, you need to evaluate your financial goals. You need to know whether your FD investment is in line with your financial goals and help you achieve them. Also, you should know how much amount to invest in a fixed deposit.

5. Taxation: Last on the list but the most important parameter to consider when you are NRI and plan to invest in India. Taxation plays a crucial role in determining your net earnings from the investment. NRI fixed deposits are partially taxable in India – it depends on the type of account. While NRE FD is completely tax-exempted, the NRO FD is liable for tax on the interest earned.

Before you go

Opening an NRI fixed deposit is a simple process, and it can be done online or by visiting the bank’s branch. However, as discussed above, you need to be careful while opening an NRI FD. Taxation gets complicated for NRIs, and hence it is always better to consult an advisor. They give you the best investment advice and also take care of your taxation.

Right Horizons has years of experience in helping NRIs manage their money. You may want to open an NRI FD account, invest in a mutual fund, or stocks, or create a Will – Right Horizons is your one-stop solution. Leave all your financial worries with us and enjoy your time with your loved ones.

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