Fixed deposits (FDs) For NRIs
Types of Fixed Deposits: NRIs can open fixed deposits in India through their NRE, NRO, or FCNR (Foreign Currency Non-Residential) accounts. NRE FDs are maintained in Indian rupees, NRO FDs are maintained in Indian rupees or foreign currency, and FCNR FDs are maintained in foreign currency.
Currency Options: NRIs can choose to open fixed deposits in Indian rupees or in foreign currencies such as US dollars, British pounds, Euros, etc. The choice of currency depends on the type of account and the source of funds.
Tenure: Fixed deposits have varying tenures, typically ranging from a few months to a few years. The tenure can be chosen based on your investment goals and liquidity needs. Longer tenures often offer higher interest rates.
Interest Rates: The interest rates on fixed deposits are determined by the banks and can vary based on the tenure and the type of account. Generally, NRE fixed deposits offer higher interest rates compared to NRO fixed deposits.
Repatriability: NRE fixed deposits are fully repatriable, meaning both the principal and interest can be freely transferred back to a foreign bank account. NRO fixed deposits have restrictions on repatriation, allowing only the interest earned to be repatriated, subject to certain conditions.
Taxation: Interest earned on fixed deposits is taxable in India. However, for NRIs, certain benefits are available under Double Taxation Avoidance Agreements (DTAA) between India and their country of residence. It’s advisable to consult a tax expert to understand the tax implications based on your specific situation.
Automatic Renewal: Fixed deposits can be set for automatic renewal upon maturity unless you instruct otherwise. This ensures that your funds continue to earn interest even after the initial tenure ends.
Premature Withdrawal: In case of an emergency or a need for funds, NRIs can prematurely withdraw their fixed deposits. However, there may be penalties or a reduction in interest rates for such withdrawals, so it’s important to review the terms and conditions of the fixed deposit before investing.
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