NRE Fixed Deposit

With so many people leaving the country to work abroad or living in other countries for extended periods of time a common question lots of NRI’s are asking is how can they invest in fixed deposits in India? There is no doubt about the fact that fixed deposits have been a favourite choice for investment in India for a long time and these days, with lakhs of people living and earning outside the country it NRE deposits have become increasingly popular.

So what are NRE fixed deposits? NRE fixed deposits are just like regular term deposits where NRIs use NRE accounts to open fixed deposits. The basic requirement for NRE deposits are NRE accounts that can be opened with various banks. These accounts can be opened without the permission of the RBI and are virtually tax free.

To be eligible to open NRE fixed deposits, you need to have NRE accounts. You also need to be a Non Resident India (NRI) or a Person of Indian Origin (POI). To open an NRE deposit you might need documents like your passport, a valid work visa and address proof.

NRE deposits come with a wealth of features that are meant to make banking that much easier for the customers. Some of these features are:

• The NRE deposit offers flexible tenures for the deposits that may range from 1 year to 10 years depending on the banks policies.
• They can be terminated prematurely at any time once they are opened however, there may be a penalty charged for premature withdrawals based on the banks rules.
• Money can be deposited in these account in Indian rupees even if it comes from an income earned outside India.
• Some banks offer overdraft facilities on the NRE deposits which allow for up to 90% overdrafts.
• Some banks may even allow you to take loans against an NRE deposits. The amount you can take will be defined by the banks policies.
• Certain banks will also offer auto-renewal facilities where the FD renews itself once it matures.
• Certain banks also allow you to open NRE deposits which are held jointly by you and another NRI.
• Some banks also have stipulations about what the minimum and maximum amounts you can deposit in these schemes therefore its best to consult your bank before deciding to remit the money.
• Some banks may even offer tax saver fixed deposits to NRI’s that allows them to claim tax benefits under section 80C of the IT Act.

The interest earned on an NRE deposit depends on the duration for which the deposit is opened but it can easily be up to 8% per annum or more, depending on the banks policy. As far as taxes on these deposits are concerned you should know that as of now interest earned on an NRE deposit is not taxable in India.

Word to the wise, close an NRE fixed deposits before 1 year is over and it could result in some banks not paying any interest on it, so try to avoid premature closure of these deposits.

There are many benefits to having NRE fixed deposits in India. Some of these are:

• It allows NRI’s to be able to open fixed deposits in India where their money can earn an impressive interest.
• Since they can be closed prematurely, they offer ready funds for a rainy day.
• With the overdraft and loan facilities these deposits ensure you have money when you most need it.
• NRE deposits also offer nominations facilities that can be used to define a beneficiary for the maturity value of the deposit.

The only down side to an NRE fixed deposit is that if the bank offers special interest rates for senior citizens, they would not be applicable to NRE deposits.