When you move overseas, you can no longer use your Fixed Deposit. You are expected to convert it into a Non-Resident Indian Fixed Deposit instead. Doing so is mandatory as per the Foreign Exchange Management Act guidelines. Hence, do the needful if you have not already. But an NRI Fixed Deposit Account comes in different types. In such a case, which one should you choose? You should opt for the one that meets your financial requirements effectively.
If you need assistance with the selection process, look no further. Each type is explained briefly:
- Non-Resident External or NRE FD
An NRE Fixed Deposit Account is ideal for global Indians earning in foreign currency. It automatically converts the holder’s deposits into Indian Rupees. It also maintains these funds in the same manner throughout the deposit tenure. Such an FD Account also offers full repatriation. It allows the holder to withdraw the principal amount and the interest earned quickly.
But the best part is that the interest earned through an NRE FD is exempt from taxes. This is suitable for individuals who cannot afford taxation either.
- Non-Resident Ordinary or NRO FD
An NRO Fixed Deposit Account is best suited for those who earn income from India. For instance, you have moved to the US. In your absence, you put your house on rent. Now, the rent will be the income you earn from India. In this case, an NRO FD will facilitate such transactions. This NRI FD also allows joint holdings. You can open it with an Indian resident or another NRI.
- Foreign Currency Non-Resident or FCNR Account
An FCNR Fixed Deposit Account lets you deposit funds in freely convertible currencies. It serves best individuals who keep moving to different countries for work. It allows them to maintain the deposited funds in the original foreign currency. The following are the currencies accepted in this type of NRI FD Account:
- US Dollar (USD)
- Canadian Dollar (CAD)
- Great Britain Pound (GBP)
- Australian Dollar (AUD)
- Canadian Dollar (CAD)
- Japanese Yen (JPY)
- Hong Kong Dollar (HKD)
- Singapore Dollar (SGD)
These currencies’ minimum and maximum deposit amounts vary from bank to bank.
Things to consider before selecting an NRI FD
Before you open NRI Fixed Deposit Account, keep these aspects in mind:
- Taxation policy
Understand the taxation policy of each NRI FD. It plays a significant role in your total investment.
- Your financial goals
Be clear about your financial goals before you start your deposit journey. Doing so will assist you in picking the right kind of NRI FD.
- Duration of your deposit
Each NRI FD has different minimum and maximum durations. For example, the minimum duration of an NRE FD is one year. Hence, it is essential to be mindful of this.
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