NRI Fixed Deposits – Where Your Money Will Be In Safe Hands

You have been toiling away in the Gulf for some years, and want to put away your hard-earned money for some cherished dream of yours. Maybe you want to build a home after you return to your home town. Or you want to keep some money for your children’s future. Of course, you would like to see your money grow, but there is absolutely no question of taking any risks! What would you do?

The obvious answer is, go for a fixed deposit!

A fixed deposit is considered to be one of the most secure forms of investment. You are guaranteed to get the quoted returns within the proposed time frame. For the same reason, NRIs tend to invest a lot of their hard earned money in fixed deposits. If you are new to FDs, here are some important tips you should know before opening a fixed deposit.

1. A Fixed Deposit account can be opened by an NRI (individuals) in the form of an NRE, NRO, or FCNR deposit. This would be for a fixed period and currency. The details regarding the details of NRI fixed deposit accounts are available on request. This will provide us with information on different period of deposits, the current rates of interest on the deposits, and the minimum deposits that can be done etc.

2. The rate of interest on the deposit can vary from time to time, depending on directives from the Reserve Bank of India.

3. The interest rate is calculated differently for different types of accounts. On the cumulative fixed deposit, it is calculated on the basis of the type of currency that we deposit. For local currency deposits the interest is compounded at quarterly rests according to the rates prescribed and for foreign currency the interest is compounded on a half yearly basis. At the end of the term the interest is paid along with the principal amount to the account holder.

4. For ordinary Fixed Deposits the interest is paid at the end of the term to the account holder along with the principal amount on a quarterly basis where the deposits are made as local currency. For foreign currency deposits the payment of interest is done on a half yearly basis along with the principal amount at the end of the term.

5. The tax imposed on the accounts also varies accordingly. For the NRE and FCNR Fixed Deposits held by individuals the interest is not taxable but in the case of the NRO deposits the interest is subjected to a tax at the rate 30.60% and is deducted from the amount (as tax deducted at source or TDS).

6. Upon maturity, the deposits will be renewed automatically on the date of maturity for the same period of time and at a rate of interest applicable at the time of maturity. This will be continued unless and until different instructions are given to the bank. The accounts will be subjected to the rules implemented by the Reserve Bank of India on such accounts at the time of the renewal.

7. The withdrawal of these accounts before the time of maturity can be done on the following periods. For NRE the minimum period for withdrawal is 12 months, for FCNR it is again 12 months, and for NRO it is 15 days.

8. The bank will take penalties from the FCNR (B) deposits that are withdrawn before its maturity and these penalties will be determined by the bank from time to time on the interest rate movements and swap cost movement.

9. The Fixed Deposits will also be subjected to a penalty of 1% if it is withdrawn before its maturity period. Such withdrawals are allowed at the Bank’s discretion. The interest during the period of deposit will be given to the account holder on the basis of the interest rate prevailing on the date of placement for such period.

That’s all about FDs in a nutshell, for the NRIs.