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5.4

Options for NRI Fixed Deposits in India

If you are contemplating investing your money in a fixed deposit in India, here’s what you need to know…

With the dollar having appreciated over the past year and interest rates peaking in India, it is a good time to invest in a fixed deposit in India. Learn more about the different types of fixed deposit options available for NRIs…

NRE Fixed Deposits:

Your overseas savings remitted/transferred to India can be invested in NRE Fixed Deposits. These are Rupee denominated deposits that offer attractive returns along with liquidity. Moreover, there is no tax deduction on the income earned on such deposits. The principal amount as well as the interest earned is fully repatriable. The tenure of such deposits typically ranges from 1-5 years. You open an NRE Fixed Deposit through:

  • Funds remitted from abroad via official banking channels.
  • Foreign currency tenders or a traveller’s cheque.
  • A transfer of funds from your existing NRE bank account.

NRO Fixed Deposits:

An NRO Fixed Deposit is an ideal channel for investing money that you have earned in India. This could be your salary, rent received on property in India, dividends, etc. The interest earned on NRO Fixed Deposits is repatriable although taxable (tax being deducted at source). The repatriablity of the principal amount is subject to certain terms and conditions.

You can invest in an NRO Fixed Deposit by:

  • Depositing your moneys earned in India in an NRO deposit.
  • Remitting funds from abroad through official banking channels and then using it for the NRO deposit.
  • Transferring funds from your existing NRE, NRO or FCNR account and then using it for the NRO deposit.

FCNR Deposits:

These deposits are denominated in select foreign currencies (including USD, GBP, EUR, JPY, etc.). These deposits eliminate the risk of unfavourable movements in the foreign exchange rate between the time of investment and repatriation. The interest on such deposits is not taxable in India and is earned in the currency of the deposit. Both the interest and the principal amount are fully repatriable.

Fixed deposits are an integral part of every investor’s portfolio. Along with safety of the principal amount, they provide liquidity and steady earnings. It is thus imperative to have at least a portion of your total investments in fixed deposits and this is the right time to invest in fixed deposits and lock into attractive interest rate for the long term.

Now that we have understood different types of fixed deposit options available for NRIs, let’s understand NRI Income Tax Rules & Policies in India.

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