How NRI FD accounts work and how they can build your wealth

Fixed deposits (FDs) are a reliable way for NRIs to grow their wealth while managing cross-border finances. With options designed to cater to the unique needs of expatriates, an NRI FD account offers the perfect blend of stability, attractive returns, and flexibility.

Whether you're looking to safeguard foreign earnings or diversify your portfolio, an NRI account is a perfect way to combine convenience with high returns. This article explores the types of NRI deposit accounts, their benefits, and how to open one with IDFC FIRST Bank.

Types of NRI FD accounts
 

When it comes to NRI FD accounts, there are three primary types, each catering to specific financial needs–

1. Non-Resident External (NRE) deposits –
 

NRE accounts are designed to manage foreign earnings converted into Indian Rupees (INR). They offer tax-free returns and unrestricted repatriation (the ability to transfer funds abroad, including principal and interest). 

Features – 

a. Currency – Deposits are maintained in INR; foreign currency is converted at prevailing exchange rates upon deposit.

b. Minimum deposit – Typically, a minimum of ₹10,000 is required.

c. Tenure – Deposit tenures range from 1 year to 10 years.

d. Interest computation – Interest is computed at a fixed rate, with options for simple or compound interest.

e. Interest payment – Interest is accrued monthly. For compound interest FDs, interest is compounded every 90 days and paid on maturity. For simple interest FDs, interest is paid quarterly or monthly, with monthly payouts provided at a discount.

f. Deposit renewal – Deposits are automatically renewed for the same tenure at the applicable interest rate on the renewal date unless the account holder provides different instructions.

g. Tax on Interest – Interest earned is fully exempt from Indian income tax, but it may be taxable in the depositor's country of residence.

h. Joint account holder – These deposits can be opened jointly with other NRIs, PIOs, or OCIs. Resident Indian relatives may be added as a second holder on a "Former or Survivor" basis (access granted only after the NRI’s demise).

i. Funding the account – They are funded through foreign currency remittances or transfers from other NRE/FCNR accounts in India.

j. Repatriation – The funds are freely repatriable, meaning both principal and interest can be transferred abroad without restrictions.

At IDFC FIRST Bank, NRE deposits offer tenures of 1 to 10 years, competitive interest rates up to 7.90%, and flexible payout options, providing a perfect solution for foreign earnings.

2. Non-Resident Ordinary (NRO) deposits –
 

NRO accounts are designed to help NRIs manage income sources such as rent, dividends, or pensions earned in India. These accounts enable them to retain and grow their domestic earnings. 

Features –

a. Currency – Deposits are held in INR, with foreign currency converted at the prevailing exchange rate.

b. Minimum deposit – A minimum deposit of ₹10,000 is required.

c. Tenure – Options typically range from 7 days to 10 years.

d. Interest computation – Interest is calculated at a fixed rate. Both simple interest and compound interest options are available.

e. Interest payment – Interest is accrued monthly. In compound interest FDs, interest is compounded every 90 days and paid on maturity. In simple interest FDs, interest is paid quarterly or monthly (with a discount for monthly payouts).

f. Deposit renewal – Deposits are automatically renewed for the same tenure at the applicable interest rate unless the depositor provides alternative renewal instructions.

g. Tax on interest – Interest earned is taxable in India and subject to Tax Deducted at Source (TDS) at 30%, plus applicable surcharge and cess. The depositor may be eligible for tax relief under the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence.

h. Joint account holders – Deposits can be opened jointly with other NRIs, PIOs, or OCIs. Resident Indian relatives can be added as a second holder under the "Former or Survivor" rule.

i. Funding the account – The account can be funded through legitimate income earned in India (e.g., rental income, pensions), transfers from other NRO or NRE accounts, and foreign currency remittances from abroad.

j. Repatriation – The deposit allows limited repatriation of up to $1 million per financial year (after applicable taxes). However, the submission of documents as per RBI guidelines is required based on the source of funds.

At IDFC FIRST Bank, NRO fixed deposits come with flexible tenure options of up to 10 years and easy booking through the mobile app, simplifying account management.

3. Foreign Currency Non-Resident (FCNR) deposits –
 

Ideal for NRIs seeking to avoid currency risks, FCNR accounts allow deposits in foreign currencies while earning competitive returns.

Features –

a. Currency – Major currencies like USD, GBP, EUR, AUD, and SGD are accepted.

b. Minimum deposit – This deposit requires a minimum deposit of $1,000 or equivalent in another currency.

c. Tenure – It has fixed tenures ranging from 1 year to 5 years.

d. Interest computation – Interest is calculated at a fixed rate.

e. Interest payment – Interest is compounded every 180 days and paid on maturity. For tenures longer than 180 days, interest for the first 180 days is added to the principal before the next interest calculation.

f. Deposit renewal – The deposit is automatically renewed for the same tenure at the applicable interest rate unless renewal instructions are changed.

g. Tax on interest – Interest earned is fully exempt from Indian income tax but may be taxable in the depositor's country of residence.

h. Joint account holders – These deposits can be opened jointly with other NRIs, PIOs, or OCIs. Resident Indian relatives can be added as joint holders on a "Former or Survivor" basis.

i. Funding the account – These deposits are funded through foreign currency remittances or transfers from NRE/FCNR accounts in India.

j. Repatriation – Full repatriation of both principal and interest is allowed.

IDFC FIRST Bank offers FCNR deposits in five currencies with competitive interest rates, ensuring safe and profitable investments for NRIs.

NRI FD account benefits
 

Opting for an NRI FD account comes with numerous advantages tailored to expatriates –

1. Tax-free earnings – NRE and FCNR accounts provide tax-free interest in India, ensuring higher returns without deductions.
   
   
2. Full repatriation – NRE and FCNR accounts allow unrestricted transfer of principal and interest abroad, making it easier to manage funds across borders.
   
   
3. Currency protection – FCNR accounts eliminate exchange rate risks by maintaining deposits in foreign currencies like USD or GBP.
   
   
4. Flexible tenures – Most banks, like IDFC FIRST Bank, provide tenure options ranging from 7 days to 10 years for NRO accounts and 1 year to 10 years for NRE accounts, helping you align investments with your financial goals.
   
   
5. Portfolio diversification - NRI FD accounts enable diversification by offering secure investments with steady returns, complementing other financial instruments in your portfolio.

How to open an NRI deposit account at IDFC FIRST Bank
 

Opening an NRI FD account is hassle-free. The eligibility and documentation requirements are the same as any NRI savings account, although the application forms may vary between banks. At IDFC FIRST Bank, you must already hold an NRI savings account to open a fixed deposit.

With IDFC FIRST Bank, you can open NRE/NRO Fixed Deposits online using net banking, a mobile banking application, or by sending an email from the registered email ID to your Relationship Manager. You can also book an FCNR Deposit Account by reaching out to any IDFC FIRST Bank representative or connecting with your Relationship Manager.

Conclusion
 

NRI FD accounts simplify cross-border money management and offer security and steady growth. With benefits like tax-free earnings, flexible tenures, repatriation freedom, and currency protection, these accounts are ideal for achieving both short-term and long-term financial goals.

Explore the best NRI accounts in India with IDFC FIRST Bank and enjoy competitive rates, flexible tenure options, and seamless account management. Start growing your wealth today!