NRE or Non-Resident External accounts are highly valued financial assets of the Government of India. Typically these accounts are offered by specific financial institutions that have authority to handle foreign exchange.
NRE accounts, as suggested by its name, handles all incomes by non-residential Indians made on foreign soil. Consequently, along with handling foreign exchange these accounts offers immense tax benefits as well. Contrastingly, NRO or Non-Resident Ordinary accounts are offered to NRIs to deposit their earnings made within India.
While considering NRI FD rates, it is important for customers to understand both these two types of accounts. Under government regulations, TDS or Tax Deduction at Source is applicable on NRO accounts. The rates of tax deduction on interest earned usually vary between 31.2% and 35.88%, depending on the total return. Strikingly, NRE accounts are tax free since the funds are generated as income earned from foreign countries.
Individuals living abroad but earning in India should consider NRO accounts not just to save their income but especially to invest it. Fixed deposits are safe from market fluctuations while guaranteeing a fixed return as interest. The NRI FD rates on such fixed deposit NRO accounts also come with a few additional perks which make the investment lucrative for Indians living abroad.
Rates of FD
With numerous factors affecting the rates of fixed deposit, it is essential for customers to understand the rate divisions while calculating the exact return using online tools such as a FD interest calculator. The rates offered on a minimum deposit of Rs. 25,000 vary depending on whether it is cumulative or non-cumulative. For cumulative, the rates of interest which are generally granted by different financial institutions are –
- For tenors ranging between 12 and 23 months, rate stands at 8.00%.
- For tenors ranging in between 24 and 35 months, the rates go up to 8.05%.
- The last tenor is of 36 months which offers a rate of interest of 8.35%.
While considering if cumulative vs. non-cumulative fixed deposit which is better, customers must understand the various interest rates which are applicable on the latter as well. There are 4 types of interest rates, namely monthly, quarterly, half-yearly and annual. The 4 applicable rates of interest are mentioned underneath according to their tenor divisions in respective chronology.
- For a tenor between 12 and 23 months, the rates are 7.72%, 7.77%, 7.85% and 8.00%.
- For tenors between 23 and 35 months, the rates go up to 7.77%, 7.82%, 7.89% and 8.05%.
- For tenors of 36 months, the rates go further up to 8.05%, 8.10%, 8.18% and 8.35%.
Subsequently, it is important for NRIs to consider all the NRI FD rates before deciding on which scheme they want to apply. While considering the rates, working out the exact investment amount should also be a critical decision before making the final investment. Customers should also keep in mind that for senior citizens, these rates of interest goes up by an additional 0.35%.
There are numerous reasons to invest in fixed deposits especially since financial institutions offer many additional features which make the investment exceedingly enticing. These crucial benefits are discussed below.
- Multiple payment options: Financial institutions always look to bring forth convenience for their customers. As a result, usually they offer multiple payment methods for investing. This includes online options on one hand like payment via RTGS or NEFT. Additionally, customers also have the option of paying their fixed deposit amount by cheque as well.
- High FD amounts: The FD amounts under these schemes can reach a substantial amount. Along with the high rates of interest offered as discussed above, senior citizens get an additional interest rate over and above the current rates. Furthermore, existing customers of financial institutions like Bajaj Finance or others also get a further rise of 0.35% on their rates of interest.
Few financial institutions offer the above benefits on their NRO accounts. Resultantly, it becomes crucial that customers consider these additional benefits along with the NRI FD rates before deciding on a specific fixed deposit scheme. Furthermore, fixed deposit accounts offer assured returns against investments. Consequently, it also makes fixed deposits risk-free investment options senior citizens can benefit from most.