What Points to Consider When You Open NRE Fixed Deposit Account

NRE Fixed deposits are known to be one of the best alternatives for NRIs all over the world. The best thing about NRE fixed deposits is that they offer fixed and good returns, and most importantly, they come with a significant amount of safety. What is even more beneficial and serves as an added bonus to NRIs is that the interest earned on NRE fixed deposits are non-taxable in India.

Key advantage delivered by NRE Fixed Deposits

What seals NRE as the most beneficial alternative for NRIs is that you can repatriate both the principal and the interest you earn over the amount. For those of you who are not well versed with the terminologies, repatriate is to send money overseas from India.

What factors about NRE fixed deposits you need to be aware of?

Beneficial in every aspect, NRE fixed deposits still need to be looked into, for better interest rates. What is more important is to know that the minimum tenor for earning the interest on NRE fixed deposit is one year. If you break your NRE Fixed deposit before one year, then you would miss out on the interest. NRE fixed deposit rates are specific that way and hence need to be looked into vigilantly.

Here is a list of things you need to know before you start off with your own NRE Fixed Deposit

1. There is no obligation to open an NRE savings account with a bank for you to avail of NRE fixed deposit account. Though it is preferable for you to have an NRE savings account along with NRE FD as it gives you full control in terms of visibility, management, and withdrawal.
2. The prime advantage that comes with investing money on NRE fixed deposits is that the interest you earn on the principal is completely tax-free in India. However, you may need to pay tax in the country you earned the said amount. Checking the taxation laws of the country you are in would help you stay ahead of the curve and manage your finances better.
3. NRE Fixed deposit and NRE saving account both are freely repatriable accounts. This means that you can transfer both interest earned and also the principal amount overseas without any limit. This can be done even without the approval or permission from the RBI or any tax payment documents. This is contrary to NRO accounts wherein you need to submit documents proving the funds are net of taxes and capped to USD 1 million per year.
4. There will be no penalty levied on premature closure of NRE FDs. So, you will not have to incur any charges in case you cannot keep up with your NRE FD. (No interest paid in case of withdrawal before one year)
5. Senior citizen benefits are not extended to NRIs on the deposit / interest rates in comparison to the resident deposits where senior citizens are offered 0.5% higher interest.
6. In case of emergency, you need money for short term, you can explore the option of availing an overdraft / loan facility on your NRE fixed deposit. Most of the banks offer up to 90% of the deposit value

Knowing what you are getting into always gives you an edge and puts you ahead of the curve. NRE fixed deposit rates could vary with banks and hence knowing and researching them thoroughly before opening one could serve you well in the long haul.

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