Blog > Eligibility Criteria and Benefits Of Creating An NRE Fixed Deposit

Shashank Bhaskar
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Dec 11, 2019 12:30 PM

A Non Resident Indian or NRI is any individual who lives out of India for more than 183 days in a calendar year. Such individuals have different banking needs as compared to resident Indians. For this purpose, banks provide NRI bank accounts. The most common types of these accounts are NRE, NRO, FCNR and RFC accounts. Account holders can also create fixed deposits out of the sums parked in their NRE and NRO accounts. This article is about NRE fixed deposits – what it is, what the eligibility criteria to open one is, and the benefits of this FD. 

What is an NRE deposit?

In order to understand the term NRE deposits, you must first understand what an NRE account is.

NRE is an abbreviation for Non Resident External Rupee. An NRE account is a special type of account in which Non Resident Indians can park their foreign currency earnings. However, the foreign currency parked is first converted into INR amount, as per the applicable currency conversion rate.

The sums deposited into the NRE bank account can be used to create a fixed deposit, which is regarded as NRE fixed deposit. Despite the fact that sums are deposited in foreign currency and converted into INR, interest rates and tenures associated with this FD differ considerably from domestic fixed deposits.

Eligibility criteria to open NRE deposits

In order to open an NRE FD, you need to fall in the below mentioned eligibility criteria:

  • You need to show your NRI status – whether you are a Person of Indian Origin (POI) or OCI (Overseas Citizen of India).
  • You need to provide a photocopy of your passport, clearly showing your name, address, photograph and signature.
  • You also need to provide a photocopy of your visa and/or work permit.
  • If you are a permanent resident, you should attach a copy of your permanent residency visa and your residency permit along with your employment visa and other necessary documents requested by your bank.

Benefits of opening an NRE deposit

There are several advantages of NRE fixed deposits. They are as under

Repatriability: The principal amount deposited and the interest earned on it is freely and repatriable. However, the repatriability clause applies only to your (foreign) country of residence.

Taxation: You do not have to worry about paying any taxes on the fixed deposit in India. As per Income Tax laws and the Double Taxation Avoidance Agreement (DTAA) between India and several different foreign countries, you do not have to pay any taxes on the principal amount deposited as well as the interest earned on it.

High-Interest Rate: You can earn high interest rates on the sums parked in the fixed deposit as compared to domestic FDs

Joint FD with nomination facility: This NRI fixed deposit can be opened jointly. However, the joint holder has to be another NRI or more than 1 NRIs. Also, you can assign a nominee for the fixed deposit.

Flexible deposit tenures: The term of deposit is quite flexible. FDs can be opened for a minimum tenure of 1 year and a maximum duration of 10 years at a time, after which, you can renew it again. You may withdraw your FD prematurely before the FD term as well. However, you need to check the terms of premature withdrawals and the penalties levied by your bank.

Final word: An NRE account FD is a good option for you if you are living and earning in a country where the value of the currency is higher than INR. This way, you can benefit from the conversion rate and create savings at a faster rate.

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