Significant aspects of NRE Fixed Deposits

Posted by Shashank Bhaskar on November 11th, 2019

Many people move to foreign countries in search of a better future. Some decide to make the most of opportunities provided by their employers whereas others migrate to foreign lands at their own expense. You can decide to seek citizenship of the country you migrate to or you can move back to India after a few years. Making money and creating savings is one of the major reasons why people choose to go abroad. But how can you manage your finances in India? The answer is through NRI accounts. If you have moved to a country where the currency is stronger than India, you can make an NRE fixed deposit. Here are its significant aspects.

Basic features and benefits of NRE FDs

You can use the sums in you Non Resident External Rupee (NRE) Account and create an NRE FD. The features of NRE FDs are as under:

• You can earn higher interest rates on your NRE FDS, which in turn can help you earn higher returns in the long run.
• The interest you earned on your NRE FD is paid out in the foreign currency in which the fixed deposit is created.
• You may make partial withdrawals on your NRE FD any time you want, after completing the minimum investment tenure of 1 year.
• Most banks also provide overdraft facilities on your NRE fixed deposit and you can get overdraft of approximately 90% on your fixed deposit, if you choose a good, RBI authorised bank for your NRI banking needs.
• You may repatriate your entire fixed deposit i.e. the principal amount deposited as well as the interest earned on it at any time, after completing the minimum FD tenure.
• The greatest advantage of creating an NRE FD is that you do not have to pay any taxes for the amount invested or the interest earned on the deposit as per Indian taxation laws.

An FD for NRI can be opened jointly with another non-resident Indian and you can also register one or more nominees when you open your NRE FD.

Creating the FD

Creating your NRE FD is rather simple. It can be done in different ways. They are as under:

• You can open the FD directly by utilising the internet banking facility provided by your bank and transferring funds from your NRE account or an overseas bank account.
• You can also open the FD directly when you visit India by going to your preferred bank and presenting foreign currency notes in cash and/or traveller’s cheques. Generally, there are no restrictions in the foreign currency amount you can carry with you when you travel to India, but you must check the maximum amount you can carry.
• NRE FDs may also be created by transferring funds from your existing NRE savings account or an FCNR account opened in any other bank.
• You may also directly remit the FD amount to the bank of your choice.

Eligibility criteria and interest rate

To be eligible to open an NRE account FD, you need to be a Non-Resident Indian of Indian nationality or a Person of Indian Origin (PIO). This is the basic requirement. The interest rate you earn differs from bank to bank and may change every month as per RBI regulations.

Investing in NRE FDs can be incredibly beneficial, if you can put away foreign currency savings regularly. Also, you do not have to worry about currency fluctuations when you open this fixed deposit. If you are earning an income in a foreign currency that is stronger than INR, your savings can greatly increase through NRE fixed deposits.