An NRE (Non-Resident External) account is a type of account aimed at Non-Resident Indians. It can either be a savings, recurring or fixed deposit type of account. NRIs can deposit their foreign income in such an account and get it converted to INR. Funds in an NRE account are completely tax free.
An NRI is not allowed to hold a regular savings account in India. They must open an NRE or an NRO account to manage their finances on the Indian side. Failure to comply with this rule can attract a huge penalty. Hence, if you are planning to leave India and attain NRI status, ensure that you get your regular savings account converted into an NRO or NRE account.
A Fixed Deposit NRE account is one of the most common account NRIs used to park their foreign funds and earn interest. Naturally, you would want to choose a fixed deposit NRE account that gives you the best interest rate. Using an NRI Deposit account, you can deposit your income earned from foreign sources like your salary and earn interest on it.
Advantages of an NRE FD Account
- Interest earned as well as the principal amount is completely tax-free.
- Compared to a regular savings account, NRE FD accounts offer higher interest rates.
- Funds are fully repatriable. This means that interest as well as principal amount can be moved to the country of residence of the NRI. This feature is unlike that of an NRO account, where funds are not repatriable.
- An NRE FD account can also be held jointly with other NRIs.
- NRE FD accounts have a flexible tenure that can range from 1 year to 10 years.
Features of NRE FD Account
- Deposits can be made in Indian currency only. You can start the account with an initial deposit of Rs.25,000
- Tenure flexibility means that the account holder has control over their fixed deposit and can choose according to their requirements.
- NRE FD accounts can be auto-renewed. The facility for auto-renewal is provided by the bank and one can choose to do so after maturity.
- In case you require funds in crunch situations, you can make use of the loan against the NRE FD feature. You can avail loan up to 90% of your deposit at attractive interest rates.
- You can also open an NRE FD account jointly with other NRIs.
- The minimum and maximum amount that you can deposit depends on the bank in question.
Best NRE Fixed Deposit Rates
Many different banks offer NRE Fixed Deposit accounts and their rates of interest also differ. NRE FD rates range from 4.90% per annum to about 5.50% per annum. The additional rate of interest of 0.5% p.a. to senior citizens does not apply to NRE Fixed Deposits.
Thus, a Fixed Deposit NRE account is extremely useful if an NRI wishes to earn interest on their foreign income. It is a good investment tool for NRIs who’re looking for guaranteed returns since the interest rate is fixed. With an NRE FD account, an NRI can return to India and use the FD funds after maturity as their retirement corpus. Even when the account holder is in need of funds, they can close the NRE FD account prematurely and withdraw the funds if they please.