NRE FD – Features, Benefits, And Increased Rates
NRE (Non-Resident External) fixed deposit accounts are a popular platform for Non-Resident Indians (NRIs), providing decent and tax-free returns. Most banks have increased their deposit rates, including NRE fixed deposits, owing to the increased repo rate in India to control the rising inflation.
What is an NRE fixed deposit?
NRE fixed deposit is an Indian currency-denominated term deposit. Non-Resident Indians (NRIs) and PIOs (Persons of Indian Origin) can invest in fixed deposits (FDs) in India. NRE fixed deposit allow individuals to deposit their earnings outside India using their NRE accounts with a bank.
– NRE Account: NRIs who earn outside India need an NRE Savings account. An NRE account balance is fully repatriable. NRIs can maintain this account in Indian currency.
Features of NRE Fixed Deposits
For a better understanding of an NRE fixed deposit, refer to its following features.
● Tenure: Following regulatory guidelines, banks allow NRIs to open NRE Fixed deposits (FDs) for 1-20 years. Such flexibility of term deposits helps depositors meet their short-term and long-term financial goals. The tenure will be restricted to 10 years if booked online.
● Premature Withdrawal: NRE FDs are offered with the facility of premature withdrawal. The interest will be calculated at the pre-agreed rate applicable to the deposit with a 1% penalty on early withdrawals. There will be no interest if NRE FD is withdrawn prematurely before completing one year of opening the account.
● Periodic Interest Payouts: NRIs are offered NRE FDs with periodic interest-receiving options. You can choose from Monthly/Quarterly and Maturity as the interest pay-out options.
● Automatic Renewal: NRIs can opt for the auto-renewal facility on the NRE FDs with renowned banks.
● Joint FD Account: Banks allow NRIs with NRE accounts to open a joint NRE FD account with another non-resident. There can be a nomination facility also, depending on bank rules.
● Mandate Facility: The Mandate holder option is extended to NRE FDs. Mandate facility with leading banks makes investing and account operation easy for NRIs. An NRI with an NRE account can appoint an Indian resident (family member or close relative only) as a mandate holder to manage the account on his/her behalf.
Key Benefits of NRE Fixed Deposits
– Insured FDs: Like other FDs in India, NRE FDs are also insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC). NRI investors can claim up to Rs. 5 lakh (principal + interest) if the bank defaults.
– Repatriation: NRE accounts facilitate repatriation to the depositor’s residence country. NRIs can repatriate the full amount in an NRE FD account, i.e. the total principal amount and interest amount.
– Tax-free: Typically, FD interest income is taxable in the hand of the investor in India. But these FDs are free from taxes in India, NRIs need not pay income tax on the interest earned on NRI NRE FDs.
You may also read- What is the meaning of fixed deposit
NRI NRE FDs Interest Rates
NRE FD interest rates differ with different banks and vary for different tenures.
You can open an FD account with a renowned bank offering an attractive interest rate of up to 7.55%, which is equivalent to tax saving FD rates and other FD rates available for Indian residents.
Individuals should know that NRI NRE FD interest rates are subject to change every month. Banks offer an NRI FD calculator to ease the return calculation of FDs. It is an online and free tool to use as many times as the user wants.
Frequency of Interest Payouts on NRE FDs
The interest payment on NRE FDs depends on the type of FD booked. If it is a cumulative deposit, interest will be paid at maturity. You can book a non-cumulative NRE FD to receive quarterly payouts.
Easy NRE FD Account Opening Process
In case overseas residents are not available to visit the bank’s branch at the time of FD account opening, they can download the form from the bank’s official website. They need to self-attest and submit the necessary documents. After submission, they can transfer funds to their NRE bank account. Your FD account will be activated after receiving the credit in your bank account in India.
The Bottom Line
Bank FDs are open for NRIs and PIOs. Enjoy a higher interest rate of up to 7.55% for NRE FDs with a flexible investment tenure as per your financial requirements. Add more to your income with tax saving FD rates in India.