Know Before Investing In Fixed Deposit

An NRE Term deposit is a fixed deposit for a specified duration of time created on the Non-Resident External account. An NRE account is one of the most useful NRI accounts. It is a type of account where the NRI can transfer foreign currency earned abroad and locked in India Rupees. An NRE term deposit helps in investing foreign earning in a fixed deposit in India.

Features of NRE account-

  • RepatriationNRE accounts are fully repatriable with deposit as well as interest component.
  • Taxation – Also both the amounts are fully tax free. NRE accounts are opened by remitting foreign income directly into this account. You cannot transfer money from an NRO (Non-resident ordinary) account into this to create a term deposit. 
  • Withdrawal – The withdrawal can only happen in Indian Rupees from an NRE account. Only when you are repatriating back to the country of origination, it is in the foreign currency. Hence it is subject to foreign currency risk. 
  • Interest Rates – It is also to be noted that the interest rates on NRE accounts are easily 1-2% higher than regular NRO accounts and hence much more lucrative. 
  • Tenors – The tenors for NRE term deposits can range from 1 to 10 years. 

Other Features – 

  • You can also avail up to 90% advance with banks on an NRE deposit. 
  • Premature withdrawal of the term deposit is also allowed. The loan can be paid easily from any other account.
  • Interest rates can be paid on half-yearly basis as well in certain banks. However, if you undertake a premature withdrawal, no interest is paid before the completion of 1 year. 
  • The minimum amount for NRE account is Rs. 500. 
  • You can also open an NRE account with any other family member who is an NRI as well. 

Investing in Company FDs for NRIs

While you look for the high rates on an NRE deposit, you can also search for high-yielding Company fixed deposits which offer high interest rates up to 7.85% for a five-year term for senior citizens. This is 1%- 2% higher than bank FDs. 

The minimum amount for FD is Rs. 25,000 with Bajaj Finance. You can also avail of auto-renew and multi-deposit facility with single payment. Bajaj Finance FDs holds the highest credit rating of FAAA/Stable by CRISIL and MAAA/Stable by ICRA. 

As an NRI you can avail tax benefit under Double Tax Avoidance Agreement (DTAA). While you are allowed to invest only through your NRO account with Bajaj Finance FD, you will have to pay TDS as per your interest earned. However, you can take advantage of the following rates –

Rate of Interest:

Why are NRI Fixed Deposits with Company better than Bank Fixed Deposits?

With an Indian bank, you can expect an interest rate offering between 5% to 6 % 5 to 10 years. Company fixed deposits offer 1% – 2% higher than this. With bank interest rates forced to change at key interest rate changes, NRIs do not have the time to adapt their investments to these changes quickly.

Author Bio

Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends. Check out his blog at Highlight Story.