As we have already established in our previous article “Is it the right time to book NRE Deposits in India” that NRE Fixed Deposits can amount for a very profitable investment source in India. In this article we will glance through:
- Latest Interest Rates on NRE FD 2020
- Tenure of NRE FD
- Taxation on NRE FD in India
- Overview of NRE Account
- What Happens to NRE FD after returning to India
Latest Interest Rates on NRE FD 2020
| Banks | NRE FD Interest Rates |
|---|---|
| ICICI | 5.50%* |
| SBI | 5.40%* |
| Kotak | 5.25%* |
| RBL | 7.50%* |
| HDFC | 5.50%* |
| IndusInd | 7%* |
| BOB | 5.40%* |
| Axis | 5.50%* |
| SBM | 7%* |
| Federal | 5.85%* |
| Citibank | 3.90%* |
Tenure of NRE Fixed Deposits
NRE FD can be opened for a minimum tenure of 1 year to a maximum tenure of 10 years.
Taxation on NRE FD in India
NRE Deposit is tax-free in India as NRE Accounts are meant to maintain the income earned outside India. If you withdraw the funds from your NRE Fixed Deposit Account before 1 year (premature withdrawal) no interest will be paid on the NRE deposit.
NRE Account Overview
The NRE or Non Resident External account can be opened for the purpose of maintaining the income earned outside India with tax free interest on Fixed Deposits. Both the principal amount and interest earned are completely repatriable from India. Refer to the table to understand about the NRE Account in detail:
| Factors to consider | Non Resident External (NRE) Account |
|---|---|
| Purpose | For income earned outside India |
| Currency | INR |
| Tenure of Fixed Deposits | 1 year to 10 years |
| Interest | Up to 7.95%* |
| Repatriation(transfer of money from Indian bank account to foreign bank account) | Both Principal (money invested initially) and Interest completely repatriable |
| Tax Deductions | No tax |
What happens to NRE Fixed Deposits after returning to India?
NRIs often wonder what will happen if they opt for an NRE FD and then return to India?
We have the answer for you. Check out the effects on your NRE Deposits post your return:
- The NRE Deposits need not be converted to resident accounts after your return to India. They can remain as-is till maturity while the NRI converts to a resident
- Withdrawals can only be done in Indian Rupees
- For NRE FDs broken before maturity, interest is calculated on the number of days the FD was held with the bank
- Premature breaking of NRE FDs are subject to penalties that vary from bank to bank
- Post maturity, NRE Deposit Accounts can be converted into Resident Foreign Currency (RFC) Accounts. All freely convertible currencies are allowed for RFC Accounts such as US Dollar, British Pound, Euro, Yen
- The interest will be payable at the original rate for deposits held for full term even after conversion to an Resident Foreign Currency (RFC) Account
- The interest earned on NRE Deposits that have been converted to RFC Accounts will be exempt from tax if the status of the returning NRI is RNOR (Resident but Nor Ordinarily Resident). Conditions for being an RNOR are:
- The individual has stayed abroad for 9 years in the previous 10 years
- During the 7 financial years preceding the year the individual returned to India, they must have stayed in India for 729 days or less
NRE Deposits are one of the best modes of investments in India with a good return. These deposits are entirely based on your residential status in India. There are certain criteria laid down to be eligible to become an NRI. If you want to re-access your NRI Status, you can use the following links: