NRIs have multiple types of accounts to deal with while opening one in India – the – NRE (Non Resident External) Account, NRO (Non Resident Ordinary) Account and FCNR (Foreign Currency Non-Repatriable). The situations and conditions for each of them is different and the purpose as well.
NRO Account – The NRO account means an account that is opened to allow NRIs to manage the income earned in India. As per Foreign Exchange Management Act (FEMA), NRIs cannot mix the earnings in India and that earned abroad. Hence this is the account where rental income in India, any income from investments is allowed through the NRO account only. The account behaves much like ordinary savings account in India. The interest component is taxable but is repatriable. You can create a fixed deposit at the same rates as savings account under this.
An NRO account obligates the NRI to various Tax Deducted as per below slabs-
If annual interest on deposit is less than Rs. 50 lacs- 31.2%
If annual interest on deposit is more than Rs. 50 lacs but less than 1 Cr- 34.2%
If annual interest on deposit is more than Rs. 1 Cr- 35.88%
Thus, while opening an FD under this account you have to consider these taxes.
NRE Account – Under this account, you can deposit in foreign currency and withdraw in Indian currency as well as foreign currency as well. It is open to exchange rate risk once you repatriate. The FD rates opened on such an account are higher than that of an NRO Savings account and you can repatriate the interest and principal both and the interest earned is tax free. You can avoid taxes under the Double Taxation Avoidance Treaty which India has with some countries.
FCNR Account – These accounts allow the NRI to transfer the money in six defined currencies – the Pound Sterling (GBP), the Euro (EUR), the Japanese Yen (JPY), the Australian Dollar (AUD) and the Canadian Dollar (CAD). Any amounts are denoted in this said currencies only and the NRI does not face any forex risk. The fixed deposit principal and interest both are repatriable and can be opened from 1 to 5 years only. The only catch is the interest rates are as per each currency and is on the lowest side ranging from 0.01% to a maximum of 2%.
High-yielding Fixed Deposits
NRIs should look out for company FDs such as Bajaj Finance FDs which are highly lucrative offering up to 7.85% for a 36 months cumulative FD. You can easily utilise your NRO account to invest and earn the interest. As an NRI you can plan your deposits and choose a tenor from 12 to 36 months. The minimum amount required for FD is Rs. 25,000. Bajaj Finance FDs have also been accorded the highest credit rating of FAAA/Stable by CRISIL and MAAA/Stable by ICRA. You are assured of liquidity and high returns with various advanced features as well. You can gain an additional 0.10% if you are a returning customer. Also, you can gain an additional 0.25% if you are a senior citizen. As an NRI, you can claim tax benefits under DTAA (Double Tax Avoidance Agreement) with this fixed deposit investment. The payment can be made from your NRO account via cheque/ NEFT/RTGS mode. You can use the multi-deposit facility to invest in multiple FDs such that each FD has a different maturity timeline and interest rate. This way you need not make frequent changes to your portfolio as you can benefit from the changing interest rates with this strategy of laddering.