NRI Fixed Deposits (FDs) are one of the most popular NRI investment options in India, offering NRIs a secure and predictable return on their savings. There are two primary types of FDs available: NRE Fixed Deposit and NRO Fixed Deposit. While both NRE and NRO FDs cater to the specific needs of NRIs, they differ in terms of their purpose, taxation and repatriability. In this blog, we will delve deeper into the differences between NRE and NRO FD.
Difference Between NRE and NRO FD
Here is a table highlighting the key differences between NRE and NRO FD:
| Particulars | NRE Fixed Deposits | NRO Fixed Deposits |
|---|---|---|
| Purpose | To park foreign income in India | To manage income earned in India |
| Open With | Foreign Currency | Foreign or Indian Currency |
| Currency held in | INR | INR |
| Repatriation | Fully repatriable (principal and interest) | Restricted repatriability |
| Tax Liability | Free from tax | Subject to tax |
| Tenure of Deposits | 1 year to 10 years | 7 days to 10 years |
| Joint account with an Indian resident | Not Allowed | Allowed |
| Joint account of two or more NRIs | Allowed | Allowed |
Difference Between NRE and NRO FD: In Detail
Purpose
- An NRE Fixed Deposit refers to a type of term deposit account in which NRIs deposit funds from abroad and transfer them to an Indian account, where the currency is converted into the Indian denomination (INR).
- An NRO Fixed Deposit is for maintaining income earned in India. This account serves as a means for managing various types of income such as rental income, pension payments, and other forms of remuneration.
Currency in which the deposit is made
- In an NRE Fixed Deposit account, the deposit is made using foreign currency.
- NRIs can open an NRO fixed deposit account using Indian Rupees.
Currency Held in
- The deposits in NRE Fixed Deposit account are maintained in Indian Rupees. When you deposit foreign currency into this account, the receiving bank applies the prevailing exchange rate, and an equivalent amount of Indian rupees is deposited into your account.
- The deposits in NRO Fixed Deposit account are maintained in Indian Rupees.
Repatriation
- In the case of NRE FD, both the principal amount and the interest earned are freely repatriable. NRIs can transfer the funds abroad without any restrictions.
- Repatriation from NRO FD has certain limitations compared to NRE FD. The principal amount in NRO FD is non-repatriable. However, the interest earned on NRO FD is eligible for repatriation up to a certain limit. Currently, the Reserve Bank of India (RBI) allows repatriation of up to USD 1 million per financial year (subject to necessary documentation and compliance).
Tax Liability
- The interest earned on NRE FD is tax-free in India. NRIs are not required to pay any tax on the interest income generated from their NRE FD.
- The interest earned on NRO FD is subject to taxation in India.
- The interest earned on NRO fixed deposits is liable to be deducted at a fixed rate of 30% for taxation purposes, along with any applicable surcharge and cess.
Tenure of Deposits
- The minimum period of NRE term deposit is 1 year. Whereas the maximum period for NRE term deposit is 10 years.
- The tenure of deposits for NRO fixed deposits ranges from 7 days to 10 years.
Joint Account Holding
- An NRE fixed deposit account permits joint ownership between NRIs but not with Indian residents.
- Conversely, an NRO FD account can be jointly held with an Indian resident as well as with another NRI.
NRE Deposit Full Form
The full form of NRE FD is Non-Resident External Fixed Deposit. It allows NRIs to deposit their foreign earnings in an Indian account.
NRE Fixed Deposit Meaning
The NRE FD account provides NRIs with a means to deposit their foreign currency into an Indian account. Operated in Indian rupees, the NRE account offers complete tax exemption. NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) can utilize NRO and NRE accounts to invest in NRE deposits.
Which Bank offers the Highest NRE FD Interest Rate?
You can explore the most up-to-date NRE FD and Savings Account Interest Rates to identify the bank that provides the highest interest rate that suits your preferences.
NRO Deposit Full Form
The full form of NRO FD is Non-Resident Ordinary Fixed Deposit. It is a deposit account designed for Non-Resident Indians (NRIs) to manage their income earned in India. NRO FD offers the option to hold funds in Indian rupees and has specific repatriation and taxation guidelines.
NRO Fixed Deposit Meaning
An NRO deposit account, referred to as a Non-Resident Ordinary account. This account serves as a means for NRIs to manage their income in Indian Rupees and earn interest over time. NRIs can hold this account jointly with any resident in India.
Which Bank offers the Most Competitive NRO FD Rates in India?
NRIs can compare the latest NRO fixed deposit rates offered by various banks, such as SBI NRO fixed deposit rates, ICICI NRO fixed deposit rates, HDFC NRO fixed deposit rates, and more, before finalizing an FD scheme.
Contact SBNRI
Due to a lengthy process and lots of documents required to apply for NRI FD accounts, NRIs living away from India may face several challenges. At SBNRI, we understand this struggle. You can download SBNRI App to apply for an NRI Fixed Deposit account with a smooth procedure.You can also click on the button to apply for an NRI FD account. Visit our blog and YouTube Channel for more details.
FAQs
NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) are eligible to open an NRI fixed deposit account.
NRE accounts enjoy tax exemption, with neither the account balance nor the interest earned being subject to taxation. In contrast, the interest earned on NRO accounts is taxable at a rate of 30% as per the provisions of the Income Tax Act 1961.
The minimum period of NRE term deposit is 1 year.
