In an increasingly uncertain world economy, the majority of Non-Resident Indians (NRIs) desire secure and fruitful means to channel their earnings. One of the safest options at one’s disposal is an NRI fixed deposit. It provides guaranteed returns and a flexible array of features addressing the economic aspirations of NRIs. Regardless of whether you aim for capital conservation, regular income from interest, or tax saving, NRI fixed deposits have something important to deliver.
What is an NRI Deposit?
An NRI deposit is a fixed or recurring deposit account provided by Indian banks to NRIs only. These accounts allow individuals to deposit their foreign earnings in Indian financial institutions through NRE (Non-Resident External), NRO (Non-Resident Ordinary) for Indian currency accounts, and FCNR (Foreign Currency Non-Resident) and GIFT City accounts for foreign currency accounts. Depending on the nature of the deposit, deposits can be made in Indian Rupees or foreign currencies.
Why are FDs the Choice of NRIs?
Fixed Deposits, also known as FDs, are one of the most reliable investment tools. An FD for NRI provides a secure option for increasing your wealth without any risk to capital. Unlike market-related products, NRI FDs provide secure returns irrespective of the market scenario. They also have adjustable tenors starting from 7 days for NRO FD and GIFT City FD, & 1 year onwards for NRE & FCNR FD. So that you can modify your investment to fit your financial objectives.
Types of NRI Fixed Deposits:
Indian banks offer four major types of NRI deposit accounts that serve different investment requirements.
- The first is the NRE Fixed Deposit, which is ideal for depositing income earned outside India. Both the principal and the interest rate amount earned are fully repatriable, and the interest income is tax-free in India. This makes NRE deposit a preferred choice for NRIs who wish to grow their foreign earnings in Indian currency.
- The second is the NRO Fixed Deposit, where income earned in India, such as rent, dividends, or interest, are deposited. The interest income in NRO accounts is taxable. Repatriation is permissible up to USD 1 million per year after deductingapplicable taxes.
- The third choice is the FCNR Deposit, where NRIs can keep foreign currency deposits like USD, GBP, EUR, and JPY. These deposits protect investors from INR depreciation and come in handy for investors with plans to invest the money overseas. Interest earned is tax-free in India.
- The fourth choice is GIFT City Fixed Deposit. GIFT City is India’s special economic zone (SEZ) for financial services located in Gujarat. These deposits are offered by banks located in GIFT City in international currencies like USD, GBP, EUR, AED, and AUD. GIFT City deposits are different from FCNR deposits in two ways. First, they offer shorter deposits of shorter tenure of less than a year starting from 7 days. Second, they do not charge a penalty on premature withdrawal like an FCNR deposit.
Fixed deposits have one of their primary selling points in their guaranteed returns. NRI(NRE and NRO) deposit rates are usually comparable to the interest provided to resident Indians. FCNR and GIFT City FD rates are different depending on the currency selected.
It’s advisable to compare the NRI deposit interest rates across multiple banks before making any steps. Some banks even provide special FD schemes with higher rates for longer durations. You should also look for GIFT City and FCNR (Foreign Currency Non-Resident) deposits, which allow you to park foreign income in specified currencies, protecting you from the risk of INR depreciation while offering tax benefits.
How to Open an NRI FD:
Opening an NRI FD depends on whether you have a bank account with the bank or not. Opening an NRI FD is comparatively easier when you have an existing bank account.
For opening a new bank account, you will have to undergo the chosen bank’s specific account opening process. You usually have to do your KYC with the bank. The KYC process for opening a new NRE/NRO bank account is through furnishing identification documents, proof of NRI status, and proof of overseas address (through a utility bill or a foreign bank account statement). The KYC documents need to be notarised through registered authorities abroad.
The funds can be remitted directly from foreign country bank account or existing NRE/NRO accounts to your NRI FD account. After opening, you can operate your deposit online, with the facility to renew or withdraw prematurely.
Tips to Maximise Returns from Your NRI Deposit
Remember a few things to optimise your NRI FD. First, shop around for NRI deposit rates from banks to get the best interest rate. Second, divide your deposits over various tenures to design a laddered investment strategy. A laddered investment strategy involves diversifying your investments over various maturity periods so that a part of your money matures at fixed periods, guaranteeing liquidity and minimising reinvestment risk. This allows for greater liquidity and regular returns. Third, opt for FCNR or GIFT City deposits if you want to steer clear of INR depreciation.
Conclusion:
NRI deposit is an intelligent, safe, and flexible means of increasing your wealth in India. From a variety of deposit plans and favourable NRI deposit interest rates, to tax-saving opportunities, FD for NRI investors holds several benefits. Whichever your financial objective – retirement planning, future expenditure, or merely desiring a secure return – selecting the proper NRI FD can assist you in reaching your goal in complete tranquillity.
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