It has often been complicated and challenging for non-resident Indians to manage their finances efficiently. The distance from their home country, India, can be daunting, and not every investment avenue is available.
How can an NRI fulfil and align its financial goals by utilising opportunities both in its country of residence and India? One such preferred option for NRIs is the Non-Resident External (NRE) fixed deposit. NRE deposits offer attractive FD interest rates for NRI, tax benefits, and full repatriability, making them a popular choice among non-resident Indians.
Understanding NRE Fixed Deposit
A NRE account is a bank account that allows NRIs to park their foreign earnings. This type of account also offers fixed deposits. This fixed deposit for NRI is saved in Indian rupees. Under the NRE fixed deposit, the interest earned and the principal are completely repatriable. This means that, according to the present rules, you can efficiently forward the principal amount and interest to your country of residence without any limits or taxes.
NRE fixed deposits also offer competitive FD rates for NRI customers, making them an attractive choice for those seeking safe, tax-free returns on their international earnings. With flexible tenures and assured returns, these FDs help NRIs grow their wealth in a secure and regulated environment.
How Does The NRE Fixed Deposit Work?
NRE account is an account meant for NRIs to deposit their foreign income in Indian Rupees. This account also offers fixed deposits for NRIs. Any NRI willing to invest in this FD must first forward funds from abroad in foreign currency, which is later converted into Indian rupees at a suitable exchange rate offered by the bank. Further, this amount in Indian rupees is used to create the NRE fixed deposit. Make sure to determine the duration of your NRE fixed deposit, which typically falls between 1 and 10 years. In return, you get to earn better returns with higher fixed deposit rates in India for NRI on the NRE fixed deposit and also enjoy the advantage of complete repatriation of funds.
Why Are NRE Fixed Deposits A Smart Choice For NRIs?
Non-residential external fixed deposits let NRIs deposit their earnings from abroad in India, and their account holds money in Indian rupees. These deposits come with higher rates of interest as compared to a savings account, and are fully repatriable. Some of the major benefits that an NRE fixed deposit offers to an NRI are as follows:
- Repatriable: The interest and principal on an NRE fixed deposit are completely repatriable. This means that you can easily transfer your money back to your country of residence.
- Tax-free interest: One of the most appealing features of an NRE fixed deposit is the tax exemption. The interest you earn on fixed deposits is entirely exempt from income tax in India.
- Attractive rates of interest: NRE fixed deposits come with attractive and competitive NRI FD rates from different banks. Hence, an NRI can boost their savings by booking a fixed deposit with their NRE account.
- Flexible Interest Payout: Many banks offering NRE fixed deposit accounts to NRIs also provide flexible interest payout options. Depending on your financial goals and preferences, you can choose to receive interest monthly, quarterly, or at maturity.
- Stability and safety: NRE fixed deposits are popular for their low-risk nature. As a bank-backed instrument, an NRE FD offers a security level suitable for conservative investors.
- Currency conversion: As Indians can hold their NRE fixed deposits in INR, it becomes easy for them to plan future expenses, or investments in India, such as children’s education or purchasing properties and other assets.
Conclusion:
For a non-Indian resident looking for a safe and rewarding option to invest their foreign earnings in India, it is an excellent option to open an NRE fixed deposit. The NRE account provides flexible repayment options, superior interest rates, nomination facility, repatriable benefits, and tax-free returns. Therefore, you can explore an ample range of benefits by using an NRE fixed deposit account and growing your savings.
