Types of NRI FDs and their respective features

 When you move to another country, your resident Fixed Deposit Account becomes invalid. You are expected to convert it into a Non-Resident Indian or NRI Fixed Deposit instead. This rule is laid out by the Foreign Exchange Management guidelines and hence, must be exercised once you shift overseas.  However, an NRI Deposit also comes in different types.

In such a case, which one should you opt for? To understand this, it is essential to know about these types and their respective features. So, here is a quick guide on that.

Non-Resident External FD

An NRE FD is ideal for global Indians earning in foreign currency. The following are some of its notable features:

• It automatically converts the holder’s deposits into Indian Rupees. It also maintains these funds in the same manner throughout the deposit tenure.
• This FD Account offers full repatriation. It enables the holder to withdraw the principal amount and the interest earned.
• The interest earned through an NRE FD is exempt from taxes. Therefore, it is suitable for individuals who wish to enjoy tax benefits.

Non-Resident Ordinary FD

An NRO FD is apt for individuals who earn income from India. Here are some of its features for your understanding.

• If you have moved to another country and in your absence, you put your house on rent, the rent money will be the income you earn from India. In this case, an NRO FD will facilitate such transactions.
• This NRI FD also allows joint holdings. You can open it with an Indian resident or another NRI.

Foreign Currency Non-Resident Deposit Account

An FCNR FD lets you deposit funds in freely convertible currencies. It serves best individuals who keep moving to different countries for work. It allows them to maintain the deposited funds in the original foreign currency. The following are the currencies accepted in this type of NRI Account:

• US Dollar
• Canadian Dollar
• Great Britain Pound
• Australian Dollar
• Canadian Dollar
• Japanese Yen
• Singapore Dollar

These currencies’ minimum and maximum deposit amounts vary from bank to bank.

Parameters to remember when selecting an NRI FD

Before you open an NRI Fixed Deposit Account, keep these in mind:

Your financial objectives

Be clear about your financial goals beforehand. This will assist you in picking the right kind of NRI FD.

Taxation policy

Understand the taxation policy of each NRI FD. It plays a significant role in your total investment. For example, deposits made in an NRE Account are exempt from taxes. The same applies to an NRE FD.

Duration of your deposit

Each type of NRI FD has different minimum and maximum durations. For example, the minimum duration of an NRE FD is one year. Hence, it is essential to be mindful of this.