Have you ever heard about NRO fixed deposits that you can continue to use if you become NRI? And, if you haven’t then you can get all the information here in this blog.
We have discussed all about the NRO fixed deposit rates, its eligibility criteria, documents requirement, and its benefits. You can also compare the different NRO fixed deposit rates of several banks as shown in the table below in this blog.
So, let’s go!
What is NRO Fixed Deposit?
NRO stands for Non-Resident Ordinary Accounts. This account is specifically designed for Non-Reliable Indians to keep their current funds into existence (funds they used to have before they become NRI and funds that are earned by them within the country in form of rent, salary, dividend, and so on). And the interest earned is liable to be taxable under the 1961 Act of Income Tax, India. Also, the interest rate varies from one bank to another. Having an NRO account has several benefits.
Some of the benefits are:
- Guaranteed returns at lower investment options.
- Returns are offered on the basis of compound interest.
- The risk is lower in NRO fixed deposits and returns are also lower.
What is the difference between NRE and NRO Fixed Deposit?
A1. Here is the difference between NRE and NRO Fixed Deposit in tabular format:
| NRO Fixed Deposit | NRE Fixed Deposit |
| It is Tax Free. | It is Taxable. |
| No patriation is allowed. | It is completely patriable. |
| Can be opened as a joint account with Indian residents. | Cannot be opened as a joint account with an Indian resident. |
| Income earned in India is depositable. | Income earned in India is not depositable. |
Is investing in NRO Fixed Deposit good?
Yes, investing in NRO fixed deposits is a good idea.
An NRO fixed deposit is opened for a time period of seven days or more and a maximum of up to 10 years. The interest rates are the same as domestic deposits but can change if there is any modification in the interest rates of the economy. Here is what you will get with NRO fixed deposit account.
Most important Safety & Security
Having a fixed deposit account is considered safe and secure heaven for future investment. And, mostly FD comes with a compensation of about Rs. Five lakh per deposit from deposit insurance and credit guarantee corporation (DICGC).
Therefore, having an NRO fixed deposit account is the best security you can get as a non-residential Indian.
Liquidity
The bank FDs do not offer liquidity and when you withdraw the money before maturity you have to pay one to two per cent of the deposit amount. And, there is also a chance that some of the banks won’t even allow this partial withdrawal.
In NRO fixed deposit accounts one will receive one per cent less than the contracted rate. So it’s not an exact benefit but neither a loss logically.
Reliable Returns
The returns on NRO fixed deposit accounts are low but reliable. You can easily predict how much money you will get at the time of maturity as per your bank’s interest rate. Though the interest rate is variable depending upon the economy, the minimum one-year interest rate for NRO from private banks is 4.9 % p.a and for five to ten years it is 5.5% p.a.
Even debt funds offer the same pre-tax return to bank FD but unlike bank FD they don’t offer reliable and guaranteed returns. Although, if an individual has invested for three or more years then debt funds will stack up and as an alternative in the past. And, because of this the interest rate amount you are earning from the bank NRO fixed deposit is taxed at the marginal rate of 30% (quite a high tax bracket). But if you have invested money for a long time of three to ten years then the funds are taxable at 20%. However, the liability of tax in case of the following works very low in reality.
For example – If an NRI invested a minimum of Rs. 1 lakh in an NRO fixed deposit account for five years that supposedly matured today. And, five years back the FD interest was 7% p.a. And, if the individual falls under the highest tax bracket then the interest amount would have yielded to be 4.9%. But if the individual has invested for a short duration but in good debt funds then the annual earning will be taxed at 6.5%. And after the post-tax basis, the annual term return will be 6%.
What are the NRO Fixed Deposit features and benefits?
Here is the list of features and benefits of NRO Fixed Deposit.
- NRO account works as a medium for Non-Resident Indians who still receive earnings from several sources from India.
- All the interest collected by you on the NRO Fixed Deposit account is taxable under the Income Tax Act of 1961.
- With an NRO Fixed Deposit account, no repatriation is offered, but any interest you earn is transferable to any foreign account.
- Account-holders can open joint accounts with any Indian residents (relative, friend, or other).
- The amount is maintained in the form of Indian currency and cannot be repatriated into foreign currency.
- Clients can earn higher interest and returns on a rupee basis.
- The minimum amount one needs to open NRO fixed deposit is Rs. One lakh.
- The interest rate is variable depending on the bank you choose for opening your NRO fixed deposit account.
Mention the Latest NRO Fixed Deposit Rates
Here is the updated list of all the banks who offers NRO fixed deposit account interest rates:
|
Name of the Bank |
NRO Interest Rates | NRO Interest Rates for Senior Citizens |
|
Jammu and Kashmir Bank |
5.00% – 7.35% |
N.A |
| Yes Bank | 5.00% – 7.00% |
N.A |
| Bharatiya Mahila Bank |
5.00% – 7.25% |
5.50% – 7.75% |
| Indian Bank |
4% |
4% |
| Bank of India |
4.00 – 5.90% |
4.00 – 5.90% |
| Tamilnad Mercantile Bank |
3.75% – 5.75% |
3.75% – 5.75% |
| Lakshmi Vilas Bank |
3.75% – 6.10% |
3.75% – 6.60% |
| South Indian Bank |
3.50% – 5.70% |
4.00% – 6.20% |
| Dhanalakshmi Bank |
3.50% – 5.80% |
3.50% – 6.30% |
| Indian Overseas Bank |
3.50% – 5.45% |
4.00% – 5.95% |
| Karnataka Bank |
3.50% – 5.65% |
3.90% – 6.05% |
| Punjab and Sind Bank |
3.50% – 5.50% |
4.00% – 6.00% |
| Saraswat Bank |
3.25% – 5.85% |
3.25% – 6.35% |
| Bank of Maharashtra |
3.00% – 5.00% |
3.00% – 5.50% |
| Canara Bank |
3.00% – 5.30% |
3.00% – 5.80% |
| DBS Bank |
3.00% – 5.50% |
3.00% – 5.50% |
|
IndusInd Bank |
3.00% – 5.50% |
3.50% – 6.00% |
| Punjab National Bank |
3.00% – 5.30% |
3.75% – 6.05% |
| IDBI Bank |
3.00% – 5.70% |
3.00% – 5.70% |
| Bank of Baroda |
2.90% – 5.30% |
4.50% – 7.30% |
| Dena Bank |
2.90% – 5.3% |
3.40% – 6.30% |
| State Bank of Hyderabad |
2.9% – 5.40% |
3.4% – 6.20% |
| SBI Bank |
2.90% – 5.4% |
3.40% – 6.20% |
| State Bank of Mysore |
2.9% – 5.40% |
3.4% – 6.2% |
| State Bank of Travancore |
2.9% – 5.4% |
3.4% – 6.2% |
| Axis Bank |
2.75% – 5.50% |
3.50% – 7.25% |
| Citi Bank |
2.75% – 3.90% |
N.A |
| HDFC Bank |
2.75% – 5.50% |
3.25% – 6.25% |
| ICICI Bank |
2.75% – 5.50% |
3.25% – 6.00% |
| Kotak Mahindra Bank |
2.75% – 4.50% |
2.75% – 4.50% |
|
Deutsche Bank |
2.00% – 6.50% |
2.00% – 6.50% |
What is the eligibility criteria for opening a NRO Fixed Deposit account?
To open an NRO Fixed Deposit account, an individual has to submit the following documents.
- A completely filled application form.
- A copy of the passport of the NRI (as proof of being an NRI).
- Residence Permit or Visa of the candidate.
- Two or three passport-sized photographs of the candidate (depending on the bank you are using)
- All the money transaction details of the candidate.
It is possible that you might have to submit other necessary documents if required. NRIs must check the eligibility before they start arranging all the documents.
Name the required documents for opening a NRO Fixed Deposit account?
We have explained the eligibility criteria in tabular format so that you are more aware while you open an NRO fixed deposit account.
|
Eligibility Criteria |
Details |
|
Residential Status of an Individual |
NRI, PIO, and OCI |
| The Acceptable Transaction Currency |
Indian |
|
Availability of Joint Account |
Can open account in joint with an Indian resident or either with NRI |
| Power of Attorney |
Any Indian Residential |
What are the Tax Benefits on NRO Fixed Deposit?
NRO fixed deposit is a taxable account. However, there will be zero charges on the primary amount and the interest you made will be taxed according to the Income Tax Act of the year 1961.
Furthermore, the tax applicable on NRO fixed deposit accounts is higher, that is 30% along with the surcharges and cess. And, if the interest earned by you is more than Rs. 10 lakhs compared to the extra charge of 10% will be added.
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Frequently Asked Questions (FAQs)
Will Rs. 50,000 be Enough to Open an NRO Fixed Deposit Account?
No, the minimal deposit amount to open an NRO fixed deposit account must be Rs. One Lakh.
Can we Deposit Currency of India Into an NRO FD Account?
Yes, the NRO Fixed Deposit account accepts the Indian earn money to be deposited in it.
Is There Any Chance That Premature Withdrawals are Available?
Well, only a few banks give permission for a premature withdrawal.
Can I Earn Interest from an NRO Fixed Deposit Account? Will it be Taxable?
Yes, you will earn the interest from an NRO fixed deposit account. Further, this interest is taxable according to the Income Tax Act of 1961.
Is a Repatriation Option Available with an NRO Fixed Deposit Account?
No bank will offer a repatriation option on the invested principal amount in NRO Fixed Deposit. However, customers can transfer the interest into a foreign account.
Is NRO Fixed Deposits TDS Applicable or Not?
Yes, TDS is applicable and will be deducted on the interest earned by you from the NRO Fixed Deposit account. The TDS is deducted at 30% along with the cess and surcharge. And, for 5 million dollars the TDS rate is 31.2% on interest.
Is there any Penalty for Premature Closure of NRO Fixed Deposit?
If an individual closes his or her NRO Fixed Deposit account without the completion of its maturity period then the interest rate will be 1% less than the contracted interest rate or the rate applicable for the time deposit remained with the bank. Whatever is lower except for tenor of seven to fourteen days. You will be liable for interest only if you held the account for 7 days.
