As a Non-Resident Indian you can most certainly invest in the Indian financial circuit, provided you are well-versed with the more complex aspects related to taxation, remittances, and withdrawals. Although there are quite a few investment options for NRIs to consider, a fixed deposit is probably the safest, considering the existing financial irregularities, in the post-covid19 scenario. 

Then again, every NRI-focused FD isn’t the same and before we start discussing the NRE or Non-Resident External fixed deposits, it is advisable to discuss a fair bit about other possibilities.

NRE vs. NRO: Fixed Deposit Differences to Consider

For starters, the NRE or Non-Resident External fixed deposit concerns funds that are set up using the income that a person generates outside the country. However, if an NRI wants to use his or her Indian liquidity to invest in an FD, the same qualifies as an NRO or the Non-Resident Ordinary account.

NRO accounts are taxable as per the ‘Income Tax Act’ of 1961 and the government is liable to charge 30 percent on the acquired interest. Besides that, the repatriable principal amount is capped but the procured interest is not. Furthermore, as NRO fixed deposits take source-country earnings into account, there are no exchange rate volatilities to consider. 

Things to know before Investing in an NRE Fixed Deposit

In case you want to invest your earnings coming from abroad, the NRE fund is a more probable option. However, before proceeding, you must take certain aspects into account, including:

  1. Zero Interest

Neither the cumulative interest nor the invested principal amount is taxable in case an NRI opts for NRE FDs. 

  1. Easy Deposits

Provided you want to invest foreign earnings in an NRE Fixed deposit account, Indian banks and NBFCs offer easy to deposit and remit options. These include direct transfers to the concerned financial firms, wiring money from the FCNR account, or presenting currencies directly during your visit to India. However, NRE Fixed deposits do not allow you to invest any money earned in India. 

  1. Tenure-Specific Fixed Deposit Rates

NRE fixed deposits come with flexible tenures that usually range between one to 10 years. A majority of Indian banks, therefore, offer competitive fixed deposit rates on the NRE funds, based on the selected tenure. 

  1. Repatriable Amount

Both principal and interest amounts associated with NRE fixed deposits are completely repatriable, provided you want to shift the matured amount to the country of origin. 

  1. Restricted Form of Withdrawal

In case you want to withdraw the invested money, you can only do the same in the Indian National Rupee format. However, NRE funds are subject to exchange rate volatility, unlike the NRO Fixed deposits.

In other words, we can say a fixed deposit is a pretty reliable method to start investing in India.

Although a fixed deposit is a pretty reliable method to start investing in India, as an NRI, you need to choose carefully between NRE and NRO funds, depending on the preferences and mode of earnings. However, you need to be patient as the returns are safer but significantly slower.

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