As an NRI, you can engage in multiple investment options in India tailored for you. One investment avenue that is particularly popular among NRIs is a fixed deposit. It is the perfect option if you’re looking to grow your wealth while maintaining a level of security.
But before investing in an FD, you must be aware of its tax implications to avoid any penalties.
In this blog, we’ll analyse NRI fixed deposits in detail and their tax implications to help you make an informed decision.
How Can NRIs Invest in FDs in India?
An NRI can easily open an FD in India with a bank, NBFC, or a housing finance company. You can select from three different types of fixed deposits-
NRE Fixed Deposit: An NRE fixed deposit allows you to invest your foreign earnings in Indian rupees. Moreover, both the principal and interest amounts are fully repatriable. This means you can easily transfer them to your foreign bank account without any restrictions.
NRO Fixed Deposit: An NRO fixed deposit account allows you to invest money earned in India. Moreover, you can only transfer a maximum of $1 million from this account after submitting the required documents and earn higher rate of interests.
FCNR Fixed Deposit: This is a term deposit with a fixed tenure ranging from 12 months to 5 years. You can open an FCNR fixed deposit in any foreign currency and write check your bank website for the current rates . Additionally, it’s a safer investment option as foreign exchange rate fluctuations do not affect your deposits.
Tax Implications on NRI Fixed Deposits
NRE Fixed Deposit: Both the principal and interest of an NRE fixed deposit are completely exempt from income tax in India. This is because Indian tax laws require you to pay taxes on income earned in India. But since you deposit your foreign earnings in an NRE account, they remain tax-free. This brings us to the next point.
NRO Fixed Deposit: As your NRO fixed deposit holds income earned in India, you’re liable to pay taxes. A TDS of 30% will be deducted from your interest earnings along with surcharge and cess. However, to be eligible for interest, you must open an NRO fixed deposit account for at least 7 days.
FCNR Fixed Deposit: As your FCNR account also holds foreign currency, the interest earned is not taxable in India. Moreover, you can easily repatriate both the principal and interest amounts.
To Conclude
A fixed deposit is a smart investment strategy for NRIs as it offers security, convenience, and guaranteed returns. What’s more? Depending on the type of fixed deposit, you can also enjoy tax exemptions.
Moreover, with leading banks like IndusInd Bank, you also get a quick and hassle-free transfer process. So visit their website to open your fixed deposit today and earn guaranteed returns.
