Investment Strategy

NRIs & Fixed Deposits

By Scripbox

March, 2021

NRI FD Accounts

 NRIs parking their funds in a savings account won’t gain much.

Investing in FDs of Non-Resident Ordinary (NRO) & Non-Resident External (NRE) accounts offer better returns.

NRE Accounts

 NRIs can open rupee-based FDs in NRE or NRO accounts.

NRE FDs are for those earning in a foreign currency, but willing to convert it into rupee before investing.

 NRO Accounts

NRO accounts are meant to manage income (in rupees) earned in India.

NRIs with a rupee income need to open an NRO FD account with a local bank.

Setting Up

NRO accounts can be single, or a joint account with an NRI/resident Indian (close relative) in an Indian bank.

NRE accounts can be opened jointly with an Indian resident.

NRO Taxation

 Interest earned on NRO accounts is taxable.

The ‘interest income’ is added to the ‘total income’ earned in India in that financial year, and taxed as per the applicable slab.

 NRE Taxation

Interest earned is tax-free for NRE accounts.


NRO FDs can be opened for a period of 7 days upto 10 years.

NRE FD has a minimum tenure of 1 year.

The interest rates are usually the same as that for its domestic term deposits.


FDs are considered safe, but recent setbacks indicate depositors may be vulnerable to bank mismanagement.

Debt funds are safer as they invest in govt papers - sovereign to AA-rated.


Premature FD withdrawal comes with hefty penalties, 1-2% of the deposit amount.

Debt funds have ample liquidity, granting redemption without an exit load. 


FD returns are assured, but change depending on the interest rates in the economy.

However, debt funds offer better post-tax returns. 

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.