Fixed Deposits are a popular choice for non-resident Indians looking to invest their earnings back home in India. However, choosing the right one can confuse the different types of NRI FDs available. Hence, this guide will explore the three main types of NRI FDs: NRE, FCNR, and NRO, to help you make an informed decision. 

Non-Resident External Fixed Deposits

●       Nature: An NRE Fixed Deposit is maintained in Indian Rupees and is fully repatriable. This means that the principal amount and the interest earned can be freely transferred abroad.

●       Eligibility: NRIs and Persons of Indian Origin can open NRE FDs. However, individuals of Bangladeshi and Pakistani nationality require RBI approvals beforehand.

●       Currency: NRE FD is denominated in Indian Rupees.

●       Repatriation: The principal amount and the interest earned are freely repatriable without restrictions.

●       Taxation: Interest earned on NRE FDs is tax-free in India. However, it may be subject to taxation in the country of residence as per local tax laws.

Foreign Currency Non-Resident Fixed Deposits

●       Nature: FCNR Deposits are maintained in foreign currencies, allowing NRIs to hold deposits in currencies other than Indian Rupees.

●       Eligibility: NRIs, PIOs, and individuals of Bangladeshi and Pakistani nationality can open FCNR FDs.

●       Currency: Available in major foreign currencies like USD, GBP, EUR, etc.

●       Repatriation: The principal amount and the interest earned are freely repatriable in the foreign currency of the deposit.

●       Taxation: Interest earned on an FCNR FD is tax-free in India for NRIs. However, it's essential to understand the tax implications in the country of residence.

Non-Resident Ordinary Fixed Deposits

●       Nature: NRO FDs are maintained in Indian Rupees and are primarily used to manage income earned in India, such as rent, dividends, etc.

●       Eligibility: NRIs, PIOs, and individuals of Bangladeshi and Pakistani nationality can open NRO FD Accounts.

●       Currency: NRO FDs are denominated in INR.

●       Repatriation: While the principal amount is repatriable within specified limits, the repatriation of interest earned is subject to certain conditions and restrictions.

●       Taxation: Interest earned on an NRO Fixed Deposit is taxable in India at the applicable rate. NRIs may also be subject to taxation in their country of residence.

Choosing the right type

●       Consider your financial goals: If you want to invest in Indian Rupees and enjoy tax-free returns, NRE FDs and NRI Savings Accounts might be suitable.

●       Currency preference: If you prefer investing in foreign currencies to hedge against exchange rate fluctuations, FCNR Deposits could be a better option.

●       Income sources: If you have income generated in India that needs to be managed effectively, NRO FDs can help you consolidate and manage those funds.

Conclusion 

The choice between NRE, FCNR, and NRO FDs depends on your financial circumstances, goals, and preferences. However, before deciding, it's essential to research each type carefully and seek advice from financial experts.