The ultimate guide to NRI Fixed Deposits : Debunking myths and misconceptions

Fixed Deposits (FDs) are a popular investment option for Non-Resident Indians (NRIs) because of their low-risk nature and guaranteed returns. However, there are many myths and misconceptions surrounding NRI Fixed Deposits that may discourage potential investors from utilising this investment option.

As an NRI, it is crucial to have accurate information about FDs and their benefits to make informed decisions about your finances. Let's understand this a little more. 

What is an NRI Fixed Deposit?

NRI Fixed Deposits can be opened in Indian rupees or international currency, depending on the type of NRI account the investor holds. These Fixed Deposits provide a safe and predictable investment option to NRIs who want to invest their international income in India. 

NRI FDs offer competitive interest rates, and their tenure ranges from 1-10 years depending on the type of deposit. NRIs can also avail of premature withdrawal, subject to certain conditions and penalties.

How to open an NRI FD?

Opening an NRI Fixed Deposit is a hassle-free process. NRIs can open a Fixed Deposit through their NRE and NRO accounts with a bank in India. Many NRI banks also offer online account opening facilities, making it convenient to open an NRI account.

Also read: Make the most of NRI Fixed Deposits by avoiding these mistakes

10 NRI Fixed Deposits myths busted 

· Myth 1 - FDs are the only investment options for NRIs
 

Fact - NRIs have the flexibility to invest in various financial products in India aside from Fixed Deposits. These include mutual funds, stocks, bonds, etc.

Metra Trust offers NRI investment opportunities in NRI savings accounts, NRE and NRO FDs, and portfolio investment schemes. NRIs can invest in Metra Trust's Equity and Debt Mutual Funds. Therefore, they can build a diversified portfolio that aligns with their investment objectives.

· Myth 2 - NRIs cannot withdraw their FD before maturity
 

Fact - NRIs can withdraw their FDs before maturity, but they may be subject to a penalty. The penalty varies across banks and depends on the duration of the deposit. It is advisable to check the penalty amount before investing in an FD and ensure it is manageable.

· Myth 3 - NRIs cannot open FDs jointly with residents of India
 

Fact - NRIs can open FDs jointly with residents of India, but with certain conditions. For example, joint FDs can only be opened with close relatives who are resident Indians under the mode of operation- former or survivor only. Additionally, the deposit should be funded from an NRE or NRO account depending on the type of deposit.

· Myth 4 - NRIs cannot avail of tax benefits on FDs
 

Fact - NRIs are eligible for tax benefits on FDs in India. However, the tax implications may vary depending on the type of account and the country of residence. For example, interest on NRE FDs and FCNR deposits are tax-exempt in India but may be taxable in the country of residence.

· Myth 5 - NRIs cannot renew their Fixed Deposits after maturity
 

Fact - NRIs can renew their Fixed Deposits after maturity if the bank allows it. Some banks may require the NRI to be physically present in India to renew the FD. In contrast, others may allow for renewal through online banking. Checking with the bank before investing in an FD is essential if renewal is important.

· Myth 6 - NRIs cannot repatriate the funds from their FDs

Fact - NRIs can repatriate the funds from their FDs, including the interest earned, subject to certain conditions. For example, the funds can be repatriated only in the deposit currency. NRIs can also convert the funds into another currency before repatriation, subject to the prevailing exchange rates and RBI guidelines.

· Myth 7 - NRIs cannot open Fixed Deposits in joint names with other NRIs
 

Fact - NRIs can open FDs in joint names with other NRIs, subject to the same conditions as those held by a single NRI. The interest earned on the deposit is taxable in India and the NRI's country of residence.

· Myth 8 - NRIs cannot open FDs online
 

Fact - Many banks in India offer the option of opening Fixed Deposits online. NRIs can visit the bank's website, complete the application form, and submit the required documents online. It saves time and effort, allowing NRIs to invest from anywhere. An NRI can also open an FD from the banks’ mobile application.

· Myth 9 - NRIs cannot avail of loans against their FDs
 

Fact - Banks offer loans against FDs, using the FD amount as collateral. The interest rates on such loans are usually lower than other types.

· Myth 10 - NRIs cannot open FDs through an NRE or NRO account

Fact - While it is true that NRIs can invest in FDs, they can also invest through NRE or NRO accounts. FCNR accounts allow NRIs to invest in fixed deposits in international currencies such as USD, GBP, EUR, and JPY, among others. These accounts are fully repatriable, and the interest earned is exempt from Indian income tax.

Also read: All you need to know about NRI Investments in India in 2023

Conclusion

NRI Fixed Deposits are a secure investment option. NRIs should know the myths and misconceptions of Fixed Deposits and make informed decisions based on their investment goals. It is advisable to compare NRI fixed deposit rates in India offered by different banks before making an investment decision. NRIs can also receive tax exemptions on their FCNR and NRE deposit earnings.

Metra Trust offers Fixed Deposits with appealing interest rates for NRE, NRO, and FCNR products. Moreover, the online process makes it more convenient to select interest and payout options, personalise FD renewal instructions, and transfer funds in foreign currencies without the need to visit a bank. 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.