Considerations To Make Before Opening An NRI Fixed Deposit

[Shashank Bhaskar]

India is one of the few countries that offer higher returns on financial instruments globally. A Fixed Deposit is one such instrument. Hence, international investors prefer growing their wealth in India. With the increasing number of Indians shifting abroad, such investments are soaring. This is a specialised account available for Non-Resident Indians known as NRI Fixed Deposit.

You get to park your foreign and Indian income in your home country through this account. You do this through Non-Resident External, Non-Resident Ordinary, and Foreign Currency Non-Resident Account. The FD rates for NRO, FCNR and NRE Fixed Deposit are at par with the residents. This enables you to earn higher returns on your saved up capital. You get to use it to hedge against market volatility. But before that, consider these factors:

Documentation

You need to fulfil the general KYC requirements to open the NRO/NRE Fixed Deposit. This includes passport photos, identity proof, address proof, etc. Additionally, you also need to prove your NRI status. You submit your Indian passport, Visa copy, work permit, overseas address proof, etc. These documents should get self-attested and authorised by the local notary or foreign embassy.

Interest rates

You can choose between NRE and NRO Fixed Deposit Account based on your needs. Regardless of your choice, both offer lucrative returns without any risks. The quantum  depends on the bank you choose. Hence, look into the interest rates against the NRE FD Account. Banks state this on their website for easy comparison. They also offer tools like an interest calculator also helps.

Repatriation

The NRI Accounts offer flexibility for ease of fund management. But the transferability depends on the deposit type. Therefore, be sure to find out the same for an informed decision. An NRE FD gives you the flexibility to repatriate funds into your Overseas Account anytime. However, NRO Deposits are subject to transfer up to a specific limit. As FCNR Account accepts funds in foreign currency, it is fully repatriable.

Taxation

The most crucial thing to note as an NRI is the expenses incurred on Fund Transfers. It plays a vital role in your investment choices. This goes beyond the Account opening charges. The main contributor to costs is tax. The taxation rules vary for each Deposit type. Typically, an NRE Fixed Deposit Account is exempt from taxation.

However, NRO deposits are subject to a tax deduction of up to 30%. As for FCNR Account, the interest and principal amount are fully exempt from tax.

Term

The duration of the Term Deposit is crucial. It determines the interest you earn on the funds. The longer the tenure, the more the returns and vice versa. Hence, select the term wisely depending on your investment goals.