Considerations to Make Before Investing in NRO Fixed Deposits

Before you seek financial advice from loved ones or even consult a professional, you should be aware of savings. While saving money remains the most common advice, investments are a plus point. Investments are an effective way to keep your money working and potentially build wealth. There are different investment instruments to explore, but Fixed Deposits remain the most popular.

Non-resident Indian or NRI Fixed Deposit is an investment option curated keeping in mind the banking and financial requirement of investors. You make a lump sum one-time investment and earn reasonable interest returns through your tenure. Three types of NRI FDs you can consider are Non-Resident Ordinary, Non-Resident External, and Foreign Currency Non-Resident Deposit. If you want to invest in NRO FDs, the following are some important points to remember:

Deposit denomination

NRO Fixed Deposit is denominated in Indian Rupees. It is ideal to park your income from regular income sources in India like rental property, pension, and dividends. The easiest way to invest in NRO FDs is through your NRI Account. You can open them with any leading bank. Consider the account benefits and various services to choose a suitable bank.

Interest rates

As mentioned, you earn an attractive interest rate on your FD investment. NRO Fixed Deposit rates vary for every bank. Hence, doing your homework is necessary. Learn about offers made by various banks, compare all options, and invest with the bank having the higher interest rate. Furthermore, consider staying invested for a longer tenure. A longer tenure translates to higher interest returns and allows you to benefit most from its compounding effect.

Repatriation

This is a crucial consideration to make. You wish to have instant and unrestricted access to your investment during emergencies. With NRO Deposits, you can partially repatriate the principal sum, while the interest returns can be fully repatriated to your resident country anytime. If you wish to enjoy full and free repatriation, invest in an NRE or FCNR Deposit.

Taxation

You should be aware of the tax implications associated with any investment. NRO FD returns are taxable by law. You are liable to pay Tax Deduction at Source at 30% (plus a surcharge and CESS). If you want to earn tax-free interest returns, consider investing in NRE or FCNR FDs.

DTAA benefit

Besides your investment returns taxed in India, they could draw taxes in your resident country. This means you pay taxes twice on the same income source, translating to a high-interest liability. However, if your country has signed the DTAA, you are saved from bearing such high-interest liability. Reach out to your bank to know the applicability of DTAA benefit on your investment.

Shashank Bhaskar is an Mba student and financial advisor in Mumbai.he shares his financial experience and guides you about all your financial queries.