Non-resident Indians (NRI) can now enjoy the benefits of investing in India through various schemes. The most prominent one of these is the NRE Fixed Deposit Scheme. An NRE (Non-resident External) scheme offers taxation and repatriation benefits to NRI investors.
NRE fixed deposits are tax-saving deposits, as the interest you earn on an NRE fixed deposit scheme is not subject to taxes in India. NRIs are attracted to open FD online with leading banks in the country because banks have increased their NRE deposit rates, keeping in line with the increase in the repo rate in the country.
Let us learn more about NRE fixed deposits and their benefits for NRI investors.
NRE Fixed Deposit Meaning
As per the guidelines set by FEMA (Foreign Exchange Management Act), a non-resident Indian cannot invest his money in a traditional fixed deposit scheme meant for Indian residents. A breach of this can lead to serious penalties for the investor. Instead, an NRI investor or a person of Indian origin (PIO) can deposit his savings in an NRE FD in India. An NRE FD is an Indian currency-denominated fixed deposit account, which means it is held in Indian currency. NRE fixed deposits are tax saving deposits, and the depositor does not have to pay any tax on his FD earnings from an NRE FD to the Indian government.
Interest Returns on an NRE FD Account
Leading banks in the country offer an interest return of up to an astonishing 7.55% on NRE fixed deposit schemes which are at the same level as tax-saving deposits and other fixed deposit schemes meant for Indian residents. NRE depositors should note that FD interest rates are subject to change every month.
Contact the bank to know the latest interest rates offered by the bank on NRE fixed deposit accounts. Interested depositors can use a fixed deposit calculator to calculate the expected interest returns on their NRE fixed deposit investment.
You may also read – How to calculate fd interest
Features and Benefits of an NRE FD Scheme
● Depositors can choose the payout frequency of their NRE FD investment scheme. They can choose between monthly or quarterly interest payouts or opt for letting the interest compound along with the principal investment till maturity.
● An NRE fixed deposit investment comes with a flexible tenure ranging from one year to 20 years. If the NRI depositors open FD online, they can invest in the scheme for 10 years. Investors can decide the duration of their investment depending on their financial goals.
● There is a facility for premature withdrawal on NRE fixed deposit schemes. Depositors have to pay a penalty of 1% on the interest rate applicable on the NRE FD on early withdrawals. Banks usually do not pay any interest if the depositor withdraws the fixed deposit within one year of opening the NRE fixed deposit account.
● NRI depositors can opt for an automatic renewal of their NRE fixed deposit scheme to save the time and effort of submitting new documents and paperwork to start a new scheme.
● NRI depositors can open a joint fixed deposit account with another NRI. They can also avail a nomination facility on their NRE fixed deposit account.
● NRIs can request a mandate facility on the NRE FD. It eases the account opening and operating process for customers. NRI fixed deposit account holders can appoint a family member or a close relative residing in India as a mandate holder to manage the fixed deposit account on their behalf.
● Like all regular bank fixed deposit schemes in the country, NRE fixed deposit plans offered by banks are also insured up to a limit of Rs.5 lakhs, giving a protective cover to your investment even when you are far away.
● The income from a traditional fixed deposit scheme is taxable in India. But an NRE fixed deposit scheme offers tax-free interest returns to NRI investors.
● NRE fixed deposit schemes are fully repatriable to the investor’s residence country. NRIs can repatriate the amount they hold in their NRE FD account, including the principal and interest amounts.
NRIs can enjoy high-interest returns on their fixed deposit investments in India through leading banks’ NRE fixed deposit schemes. These schemes offer high returns and tax-free income to them.