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Understanding NRI fixed deposits in India
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Features of NRE, NRO, FCNR (B) fixed deposits
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Process and documentations for opening NRI fixed deposits
The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of April 15, 2024.
As a Non-Resident Indian (NRI), Overseas Citizen of India (OCI) or Person of Indian Origin (PIO), you can invest in a wide range of assets in India. Fixed Deposits (FDs) are a popular choice amongst NRIs as they offer guaranteed returns and additional benefits like adding a joint holder, availing overdraft facilities and using them as a loan collateral. This article explores the features, taxation and repatriation rules and the process of opening an FD as an NRI.
Types of NRI fixed deposits
As per the prevailing Foreign Exchange Management Act (FEMA) regulations, NRIs can open either a Non-Resident External (NRE) fixed deposit, a Non-Resident Ordinary (NRO) fixed deposit, or a Foreign Currency Non-Resident Bank (FCNR (B)) deposit. Let us understand these options in more detail.
NRE fixed deposit: NRIs can invest their foreign earnings in an NRE FD, which is a rupee-denominated term deposit that offers tax-free interest and the option to fully repatriate their principal and interest.
NRO fixed deposit: These term deposits are primarily used by NRIs to invest income earned in India (for example, income earned from rent, pensions and other investments). The interest accrued on these deposits is subject to taxation. These deposits allow repatriation of up to USD 1 million cumulatively for all your NRO accounts and outward remittances made from the account per financial year (April–March) subject to necessary tax documentation.
FCNR (B) fixed deposit: Using this option you can make a term deposit in foreign currency to secure your funds against currency fluctuations. These funds are fully repatriable and offer tax free interest in India.
Commonly used currencies are Australian Dollar (A$), British Pound (£), Canadian Dollar (C$), Euro (€), Japanese Yen (¥) and US Dollar ($). As per the prevailing Foreign Exchange Management Act (FEMA) regulations, banks are allowed to accept FCNR (B) deposits in any currency which is freely convertible. Please consult with your bank to know the permissible currencies for opening an FCNR (B) deposit.
Open an FCNR (B) fixed deposit
Please check the interest rates for NRE/ NRO/ FCNR (B) fixed deposit rates here
Features of NRE, NRO and FCNR (B) deposits for NRIs
Please note, tables are best viewed on desktops or in landscape mode on mobile phones.
| Parameters | NRE fixed deposit | NRO fixed deposit | FCNR (B) fixed deposit | |
|---|---|---|---|---|
Currency of deposit
|
Indian Rupee or any foreign currency |
Indian Rupee or any foreign currency |
|
|
Currency of withdrawal |
Indian Rupee |
Indian Rupee |
|
|
Tenure
|
One to ten years |
Seven days to ten years |
One to five years |
|
Interest earned |
Tax free in India |
Taxable in India |
Tax free in India |
|
Joint account holders |
Can be held with two or more NRIs/PIOs And Can be held on a ‘former or survivor’* basis with a resident |
Can be held with two or more NRIs/PIOs And Can be held on a ‘former or survivor*, basis with a resident relative** |
Can be held with two or more NRIs/PIOs And Can be held on a ‘former or survivor*, basis with a resident relative** |
|
Nomination |
Permitted |
|||
Premature withdrawals |
Permitted, with penalty |
|||
Overdraft facility |
Permitted |
Permitted |
Permitted |
|
Loan against deposits*** |
Permitted |
Permitted |
Permitted |
|
Repatriation |
Freely repatriable |
Permitted up to USD 1 million cumulatively per financial year |
Freely repatriable |
|
*The term ‘former’ or ‘survivor’ basis refers to the condition where only one of the two joint account holders that is the ‘former’ account holder can primarily operate the account. The ‘survivor’ can only operate the account after the ‘former’ passes away.
**Relative is defined under section 2 (77) of the Companies Act, 2013. This includes their parents (including stepparents), son (including stepson), son’s wife, daughter, daughter’s husband, siblings (including stepsiblings), and children.
***Please note, the loan amount cannot be repatriated abroad or to your international bank account.
Taxation on NRI fixed deposits
As per Income Tax Act 1961, any interest income earned from:
- NRE fixed deposit is exempt from income tax
- NRO fixed deposit is taxable in India as per the tax slab rate of your opted regime. There will be an upfront tax deduction (Tax Deducted at Source (TDS)) at the maximum rate of 30% plus applicable surcharge and cess. However, if India has a Double Taxation Avoidance Agreement (DTAA) with the country where the NRI is a resident, then the lower rate of withholding tax as per the respective DTAA will be deducted subject to necessary tax documentation. To know more, click here
- FCNR (B) fixed deposit is exempt from income tax
Opening FDs as an NRI
The process of opening an NRE/NRO/FCNR (B) fixed deposit is a straightforward process. If you are an existing customer:
- You can use your bank’s internet/mobile banking (e.g., ICICI Bank iMobile Pay app), and transfer funds from your existing NRE/NRO accounts to open these deposits online
- You can visit a branch or contact your relationship manager to complete the process offline
Leading banks like ICICI Bank allow you to open an NRE/NRO/FCNR (B) fixed deposit without having an existing NRE/NRO account with them. You can simply visit the bank’s website or their branch and provide necessary details and documentation. You will need to directly transfer funds from your other NRE/NRO accounts (held with other banks) or make inward remittance using ICICI Bank Money2India or other wire transfer methods. Please note, you cannot use your NRO account to fund your FCNR (B) fixed deposits.
Documentation requirements
- Copy of valid passport
- Valid work permit/employment visa/admission letter etc
- PIOs needs to submit the duly signed and filled-in form for declaration of status
- Indian address proof: Passport/Utility bill/Bank statement etc
- Foreign address proof: Utility bills (any one of the latest electricity, water, telephone bill)/residence permit/property tax etc
- Permanent Account Number (PAN) card or in the absence of a PAN card, Form 60 (if applicable)
- Foreign Account Tax Compliance Act (FATCA) declaration as applicable for the United States (US) or Common Reporting Standard (CRS) for the United Kingdom (UK), Canada or any of the 100+ countries that have adopted CRS
Please note that the documentation requirement may differ from bank to bank.
Conclusion
Fixed deposits are a secure investment option for NRIs, offering guaranteed returns and multiple benefits. NRE/FCNR (B) fixed deposits offer tax-free interest and unrestricted repatriation. On the other hand, NRO FDs attract taxes but allow repatriation upto USD 1 million cumulatively in each financial year subject to necessary tax documentation. Existing bank customers can use digital channels to open these fixed deposits. For more details you should get in touch with your bank.
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Disclaimer:
The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision.
