Five Tips for Investing in NRO Fixed Deposits

Fixed deposits make up approximately 58% of the total deposits in the country as of 2017-18. It is one of the safest forms of investment, as it accrues high interest at negligible associated risk. Non-resident Indians often choose to safeguard their domestic earnings through an NRO fixed deposit account.

Before opting for investment in such accounts, individuals must know what is NRO fixed deposit. A significant parameter NRIs must note in such situations is that only domestic income accrued can be deposited in such accounts, foreign earnings are not eligible for such investments. Also, such FDs come with certain specific parameters, which have to be kept in mind while investing in such accounts.

Tips to invest in NRO fixed deposit –

Tax provision

An essential parameter of understanding what is NRO fixed deposit is to know about the tax provisions on the total earnings. Total interest income on such deposits is subject to taxation, as per Section 10(4)(ii) of the Income Tax Act of 1961. Individuals should know about TDS on such fixed deposit interests.

The rate at which such taxation is levied depends on the income slab of the respective individual. Total earnings of an NRI having an annual income of less than Rs.50 lakh is subject to a tax at 31.2% (inclusive of surcharge plus cess), while revenue of higher than Rs.50 lakh but less than Rs.1 crore is taxed at 34.32%. An individual having a monthly income of higher than Rs. 1 Crore is subject to taxation at 35.88% respectively.

Interest rates

While selecting an ideal financial institution to park your domestic income earned through rent, interest payments, other domestic investment schemes, etc. compare the underlying interest and choose one offering best-fixed deposit rates.

Joint account facility

After understanding what is NRO fixed deposit, individuals must look into the joint account opening formalities. An NRO FD can be opened jointly by two non-resident individuals, or by an NRI and an Indian resident respectively.

Nonetheless, the proportion of contribution made by a resident Indian is subject to taxation as per the relevant Indian laws, at a relatively lower rate. NRIs can also open an NRO FD account by themselves, and provide a nominee in case of any adverse situation. 

Type of income

An important fact that NRI individuals should learn about while knowing what is NRO fixed deposit is the type of funds which can be invested in such fixed deposits. Only income earned in India can be used to open such accounts. This means that funds present in an NRO account can only be utilised to open such fixed deposits. No amount can be disbursed from NRE accounts for this purpose.

Keeping the above-stated points in mind allow NRIs to make an informed decision and invest in instruments offering best-fixed deposit rates. Such investments are bound to generate high returns, and pose as one of the safest tools, making it an attractive option among all individuals not residing in India.

Why opt for NRO fixed deposit?

As stated above, NRO fixed deposits form one of the safest investment platforms due to the following reasons –

  • Fixed deposits have no intermittent ties with the capital market of a country. As a result, total returns are not subject to market risks whatsoever, making it one of the safest tools available in the country.
  • Funds maintained in an NRO account are subject to partial repatriation, making it immune to exchange rate fluctuations. Even though the relative value of the funds change while transferring to NRE account, no change in the domestic currency occurs. Thus, NRO fixed deposits are one of the safest investment tools in the country.
  • Major financial institutions such as Bajaj Finance facilitate the process of opening and maintaining an NRO fixed deposit account, thereby making it an attractive option among individuals. Such deposits come with auto-renewal and multi online deposit benefits. Provision for higher returns for senior citizens is also provided by such top-rated non-banking corporations respectively. Thus, senior citizens should invest in Bajaj Finance FDs.

Upon understanding what is NRO fixed deposit, its benefits, as well as tips for ideal investment, individuals can successfully channel their excess funds to boost their total savings through higher interest rates.


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