An NRI, who looks for a safe and attractive investment avenue of investments. We know FDs provide assured returns. But for NRIs NRE FDs is a great investment tool with a minimum tax burden. Let’s analyze the benefits, and taxation of NRE FDs for NRIs.

NRIs who earn abroad can consider parking their money in NRE Fixed Deposits. Here are the complete details & features of NRE FDs.

What is NRE FD for NRIs?

NRIs have been transferring some money to INR and keeping them for future use. This money can be used to convert into NRE FD.

Benefits start here as one earns an interest higher than conventional savings accounts on that money. NRIs can easily open an NRE fixed deposit (FD).

So, an NRE FD for NRIs is a term deposit that offers tax-free returns. It is opened with money that is earned overseas.

Both the principal amount and interest earned are freely repatriable to the home country of the NRI.

You cannot deposit any amount earned within India in an NRE account.You can make withdrawals only in INR. The value of your invested money is dependent on the current exchange rate.

Benefits of NRE Fixed Deposit for NRIs

• The interest earned is tax-free.
• No TDS is applied as proceeds are tax-free.
• Interest rates offered on these deposits are higher than the interest rates on the NRE savings account.
• Like an FD, the returns on NRE FD for NRIs are pre-known &assured.
• Not only can you earn high returns on your investment, but you can also get a loan of up to 90% of the deposited amount.
• NRE FD can be opened in the names of two or more non-resident individuals provided all the account holders are persons of Indian nationality or origin.
• A resident close relative (relative as defined in Section 6 of the Companies Act, 1956 ) can be a joint holder ona ‘former or survivor” basis.
• The resident close relative shall be eligible to operate the account as a Power of Attorney holder under extant instructions during the lifetime of the NRI/ PIO account holder.
• Nomination in favor of NRI/PIO or a resident is allowed in the account
• Tenure of 1 Year to 10 Years is allowed with these FDs.

How to apply for NRE FD

NRE Fixed Deposit for NRIs is available as an investment product by all leading banks in India& their branches in foreign countries.

One can step into a bank with documents or call a bank representative at home.

If you have previous NR accounts (NRE, NRO) with net banking, NRE FD can be applied online.

Any individual who is an NRI by the definition of FEMA, and holds an NRE account in India can open an NRE FD account.

Interest Rates offered on NRE FD for NRIs

Like normal FD, NRE fixed deposit interest rates vary from bank to bank. They are dependent on factors like the amount and tenure of the deposit.

Here is a table of NRE FDs by leading banks as on 8 Dec 2022.

What are the current NRE FD for NRIs rates in India

Does NRE FD have a Premature Withdrawal Facility?

Yes. Most banks offer premature withdrawal of NRE fixed deposits. This can be done via a written request or can also be done online.

The penalty for premature withdrawal varies from one bank to another bank.

Usually, this is 1%.

Few banks do not pay any interest if NRE deposits are withdrawn before the expiry of the minimum 1-year period from the date of deposit. Please check the complete details at the bank or online before applying for NRE FD.

Conclusion

Tax-free interest makes NRE FDs a very attractive option for NRIs. Coupling with online facility to create a new deposit or get maturity is a very flexible option. NRIs in need of liquidity, managing emergency funds, or parking for a smaller duration can use NRE FD to their advantage.