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An NRO account or Non-Resident Ordinary account is a savings account or a deposit account denominated in Indian Rupee. It is opened by NRIs to manage their income in India. An NRO FD allows NRIs to invest their Indian income in fixed deposits and earn guaranteed returns. This article covers NRO FD, its features and benefits in detail.

What is an NRO FD Fixed Deposit?

An NRO account or Non-Resident Ordinary account is a savings account or a deposit account denominated in Indian Rupee. NRIs can open this account to manage their income in India. The account can be jointly held along with any resident in India. You can open an NRO FD account only with your NRO Account. 

An NRO FD guarantees returns in the form of interest at very low risk. The interest rates for NRO FDs vary for different banks. Also, the interest earned on the FD is taxable in India. Moreover, the principal is non-repatriable. However, the interest amount can be transferred to a foreign account.

An NRO FD can be opened only by using funds originating in India. However, one can transfer money from an NRE account to an NRO account to invest in an NRO FD. Withdrawing money from NRO FDs can be done only in Indian currency. The tenure of NRO FDs range between 7 days to 10 years. Most banks allow nomination and auto-renewal of NRO FDs. Also, NRIs can take a loan against their NRO FDs.

NRO Fixed Deposit Interest Rate

Check out: FD Rates for All Banks in India

Name of the BankNRO Interest RatesSenior Citizen NRO Interest Rates
Axis Bank2.75% to 5.50%3.50% to 7.25%
Bank of Baroda290% to 5.30%4.50% to 7.30%
Bank of India4.00 to 5.90%4.00 to 5.90%
Deutsche Bank2.00% to 6.50%2.00% to 6.50%
HDFC Bank2.75% to 5.50%3.25% to 6.25%
ICICI Bank2.75% to 5.50%3.25% to 6.00%
IDBI Bank3.00% to 5.70%3.00% to 5.70%
Punjab National Bank3.00% to 5.30%3.75% to 6.05%
State Bank of India2.90% to 5.40%3.40% to 6.20%
Yes Bank5.00% to 7.00%NA

Features of an NRO Fixed Deposit

  • Tenure: The tenure of NRO FDs range from 7 days to 10 years.
  • Interest rates: The interest rates for NRO FDs are different for different banks. Usually, the interest rates range between 2.5%-7%. Also, the interest earned is taxable in India.
  • Minimum investment: The minimum investment in NRO FDs is different for different banks. Usually, the minimum investment is in the range of INR 25,000 to INR 50,000. Investment can be made only in Indian currency.
  • Single or joint account: NRIs can open an NRO account singly or jointly along with their relatives who are residents in India.
  • Withdrawals: The withdrawals are allowed only in Indian currency. Also, few banks allow premature withdrawal facilities with a penalty.
  • Loan against FD: Few banks allow investors to take a loan against their NRI FD. Investors can get up to 90% of the deposit amount as a loan without breaking their NRO FD.
  • Eligibility: NRO FDs can be opened only by Non-Resident Indians and People of India Origin.
  • Rupee denominated: NRO FD account is a rupee-denominated account. NRIs cannot deposit foreign currency earnings in this account. Only Indian income can be deposited in an NRO account. However, NRIs can transfer money to the NRE account.
  • Non-Repatriation: The principal amount cannot be freely transferred to foreign accounts. However, the interest earned can be transferred.

Benefits of Investing in an NRO FD Fixed Deposit

NRO FD account helps the NRI investors to manage their investments, deposits and income earned in India. Following are the benefits of investing in an NRO FD:

  • Deposit Earnings in India: An NRI may have recurring income such as rental income or dividends within India. They can deposit such earnings in an NRO account and use the funds to manage their rupee expenses.
  • Easy Investments: With an NRO account, it becomes easy for an NRI to invest in bonds and mutual funds in India.
  • Loan: An NRI can pledge their NRO fixed deposit as collateral. Also, the interest rate for such loan is often lower than unsecured loans.
  • Joint Account Holding: NRIs can open an NRO account jointly with a resident family member. The joint account holder can manage the Indian financial commitments seamlessly on behalf of the NRI.
  • Attractive Interest Rate: NRO FDs offer higher interest rates and also preferential rates on remittances.
  • Repatriate Funds: In case an NRI liquidates any assets or investments, they can deposit the money in an NRO account. They can transfer the money to their country of residence (up to USD 1 million per year). Furthermore, the NRI has to pay income tax in India and can fill out the repatriation form.

Who can open an NRO Fixed Deposit?

NRO FDs can be opened only in Indian currency. Also, only income earned in India in the form of rents, or interest, etc., can be used to open an NRO FD. However, one can also transfer money from an NRE account. Also, only eligible investors can open NRO FD. Following is the eligibility criteria:

  • Non-Resident Indians (NRI) can open a single or joint account. The joint account can be opened only with an Indian resident who is a relative of the NRI.
  • A person of Indian Origin (PIO) can open a single or joint account. The joint account can be opened only with an Indian resident who is a relative of the PIO.

How to open an NRO fixed deposit?

One can open their NRO fixed deposits online. Most banks in India have their account opening process completely online. Eligible individuals have to fill out the application form, upload all the necessary documents, and verify the details.

Following are the documents that one need to submit while opening the account:

For NRI (Non-Resident Indian)

  • Form 60 or Indian PAN card
  • Indian passport
  • Proof of NRI status – Employment or Residence Visa copy or Work or Residence Permit
  • Address proof: Both Indian and Overseas as per Customer Identification Policy
  • Passport size photograph
  • For Seafarers: FEMA declaration, current job contract, and CDC copy, as well as the last page of disembarkation stamp

For PIO (Person of Indian Origin)

  • Indian passport
  • A valid OCI or PIO card or any other proof for PIO status as per Customer Identification Policy
  • Address proof: Both Indian and Overseas as per Customer Identification Policy
  • Duly signed and filled PIO declaration
  • Passport size photograph

Tax on an NRO fixed deposit

The interest earned on NRO FD is taxable in India. Also, the interest earned from NRO FD is subject to a TDS of 30% (plus a surcharge and cess). However, this rate is applicable only if the NRI fails to disclose PAN Card details.

India has entered into a Double Taxation Avoidance Agreement (DTAA) with various countries. Under this agreement, the NRI investor can enjoy lower rates of TDS for interest earned in India. Hence NRI investors who register for DTAA can enjoy this benefit.

Difference between an NRO FD and NRE FD

The major difference between NRO and NRE FD is whether an individual is looking at rupee inflow in India or just foreign flow. Also, the repatriable option. Following are the key differences between NRO FD and NRE FD:

Deposits and withdrawals

Funds originating in India can only be deposited in an NRO account and subsequently in an NRO FD. One cannot transfer the funds from foreign and start an NRO FD. Furthermore, funds from an NRE account can be transferred into an NRO account.

On the other hand, the NRE account requires remittance of foreign currency earned from abroad directly into the NRE FD account. One cannot use an NRO account or resident savings account to invest in NRE FD.

Furthermore, withdrawals from both NRE and NRO accounts can be made only in Indian Rupees.

Repatriation

The repatriation option is not available only on the principal investment amount of NRO FDs. However, the interest from the NRO FD can be transferred to a foreign account.

On the other hand, the NRE fixed deposits have an option to repatriate the funds fully. In other words, both principal amount and interest accrued can be repatriated into a foreign account.

Interest Rates

The interest rates of NRO and NRE accounts vary from bank to bank. Therefore, it is best to choose a scheme that offers significant interest rates. Typically, the duration of NRE and NRO FD ranges between 1 to 20 years.

Taxation

NRO fixed deposits attract taxes as per the Indian laws. The interest from an NRO FD is taxable at 30% according to the Income Tax Act, 1961.

On the other hand, NRE fixed deposits do not attract any taxes on both principal or interest. Hence, NRE FDs are completely tax-free.

Joint Accounts

NRIs can open NRO and NRE accounts jointly. However, for an NRO account, the NRI can jointly open the account only with an Indian resident citizen (resident family member).

On the other hand, NRE FDs cannot be jointly held with a resident Indian citizen, even if that individual is a direct family member of the NRI.

Suitability

If an NRI wants to park their Indian earnings, then an NRO account is the most suitable option. While, if an NRI wants to park funds in foreign currency and want it to be fully repatriable, then NRE FD is a suitable option.

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