Can NRIs have both NRE and NRO FDs?

Yes, NRIs can absolutely have both NRE (Non-Resident External) and NRO (Non-Resident Ordinary) fixed deposits (FDs) simultaneously. In fact, it's quite common for NRIs to utilise both types of accounts to manage their finances effectively.

Is it possible to convert a NRO FD to an NRE FD?

No, it is not possible to convert a NRO FD to NRE FD due to difference in the nature of the funds. NRO account is for your Indian source of income, and NRE account for your foreign income. You can however withdraw the NRO fixed deposit pre-maturely, and can book an NRE FD. NRE account has a repatriation limit of $ 1 million.

What happens to the fixed deposits if an NRI's status changes?

There are different categories of changes that can happen based on your status as an NRI. When you return to India and become an Indian resident, your NRE-FDs will be re-designated as resident account FD, and will be taxable according to Indian slab rates. You can continue on-to hold your NRO FD. When your status is changed to resident not-ordinarily resident, you can continue holding your existing NRE and NRO FDs. The interest earned on NRE FD remains tax free, while NRO account remains taxable in India. You should inform the bank about the change in the status.

Which FD provides best returns for NRIs?

GIFT City FDs present a compelling combination of competitive returns, tax-free interest and currency flexibility. This makes them a strong contender for the type of FD that provides the best returns for NRIs.

GIFT City FD vs Other FD for NRIs: Detailed Comparison

Introduction

Choosing which type of FD to invest in as an NRI is a process that is layered as there are several options available to the discerning NRI as it stands today. Which one is truly best? Is there just one, or do the multiple options offer tailored advantages specific to each?

Let’s do a head-to-head comparison of the traditional INR deposits (NRO/NRE FDs), the foreign currency deposits offered by Indian banks (FCNR Deposits) and the deposits offered by GIFT City to give you a comprehensive idea of what’s on offer in terms of investments, as an NRI.

GIFT City

GIFT City (Gujarat International Finance Tec-City) has been at the forefront of financial news in the past few years for a host of reasons, such as fintech innovation, a novel regulatory framework, and even its sustainable design.

GIFT City IFSC is envisioned as a global financial and IT services hub, comparable to financial centres like Singapore and Dubai. It is designed to be investor-friendly and offers a simplified process for setting up businesses, with quick approvals and minimal bureaucratic hurdles.

GIFT City FD

These are the fixed deposits offered to NRIs by banks (both Indian and foreign) located in GIFT City. These IFSC Banking Units (IBUs) operate under the regulatory framework of the International Financial Services Centres Authority (IFSCA), an umbrella banking, insurance, investments and PF regulator established by Indian law specifically for GIFT City.

You can check more information about GIFT City FD in the blog here.

FCNR deposits

FCNR deposits are the term deposits tailored for NRIs to park their foreign earnings in their familiar currency without converting to Indian rupees. These deposits are offered by banks in India and are regulated by the Reserve Bank of India (RBI), ensuring security and trust in these foreign currency savings instruments.

NRO fixed deposits

NRO FDs are designed to help NRIs manage their income earned in India, such as rent, dividends, pensions, etc. These RBI-regulated deposits are offered by most major banks in India. Repatriation of NRO deposits is regulated as per FEMA (Foreign Exchange Management Act) rules.

NRE fixed deposits

NRE FDs are offered to NRIs to park their foreign earnings in India in Indian Rupees. Most major banks in India offer these RBI-regulated deposits.

Interest rates of GIFT City FD, FCNR deposit, NRO, and NRE fixed deposits compared

	GIFT City FD	FCNR FD	NRO FD	NRE FD
Duration	7 days to 10 years	1 year to 5 years	7 days to 10 years	1 year to 10 years
Currency	Major international currencies like USD, GBP, Euro, etc.	Major international currencies like USD, GBP, Euro, etc	INR denomination	INR denomination
Repatriation	Freely repatriable (principal + interest) outside India	Freely repatriable (principal + interest) outside India	Repatriation limit set by FEMA (1 million USD in a year)	Freely repatriable (principal + interest) outside India
Taxation	Tax free in India and is subjected to taxation norms of your resident country	Tax free in India, and is subjected to taxation norms of your resident country	Subject to taxation in India according to tax slab + 30% TDS on interest	Tax free in India and is subjected to taxation norms of your resident country
Premature withdrawal	Premature withdrawal is allowed.	Premature withdrawal is allowed, but you will not receive the interest amount.	Most banks allow premature withdrawal. Check with the specific bank for T&C	Premature withdrawal is allowed with a penalty. Check with the bank for more details.
Key benefits	Globally competitive interest rates, no need for currency conversion and fluctuation, no tax in India and easy repatriation.	No currency depreciation risk, loans availed against FCNR deposit, no tax and easy repatriation.	Competitive interest rate and avail loans based on deposits	Competitive interest rate, tax free, loans against deposit and freely repatriable

Also Read:

Which FD offers the best rates? GIFT City vs. NRO, NRE, FCNR

Now that you have seen the comparison between all four of the fixed deposits, let’s turn our attention to the deal breaker, i.e., interest rates. Interest rates are subject to change in different time periods based on bank policies and rates being offered at the moment. An important factor to consider along with the interest rate is the Rupee depreciation. Rupee depreciation will eat into your interest earnings when you redeem and take your money abroad.

You can check the interest rates being offered by different banks on NRI fixed deposits through this FD tracker tool. This tool shows the interest rates offered by ten different banks, along with the tenures, types of deposits, and types of bank accounts.

Conclusion

GIFT City Fixed Deposits are great if you are looking to go with adjustable tenures, special taxation treatment, and no restriction on repatriation alongside avoiding currency depreciation risk. Traditionally, FCNR deposits are an option for you to grow your foreign earnings in foreign currency in India along with earning repatriable and tax-free interest. NRO deposits can help you grow your Indian income with flexible tenures. NRE deposits allow you to grow your foreign earnings in Indian Rupees and earn tax-free interest in India with full repatriation benefit.

Each deposit option can accordingly be chosen to fit the relevant income source and your overall financial goals. You can choose from the listed deposit options to suit any given source of income and your financial goals.

Comparing Fixed Deposits: GIFT City FD vs. FCNR vs. NRO vs. NRE