The NRI account is an ideal option to consider investing funds from abroad or from the resident country. Amongst the different options that are available, the NRO account fixed deposit is one option to consider, especially when investing funds for a long-term purpose. This type of NRO account is best used to manage income that is earned in India through the form of dividends, rents or even pensions earned from other countries.
The funds that are invested in this account is held in the local currency, which is INR. Not only does it make it convenient to consolidate earnings from India, but it also makes it easier to access the funds in the local currency. Additionally, one of the main features that the account holder must be aware of is the repatriate limit for the financial year, which is about 1 million USD.
Apart from this, there are additional features of this type of NRO account that must be taken into consideration. They include:
• Taxation: This FD attracts taxes as per the Indian laws. As per the Income Tax Act, 1961, the interest earned on the account is over 30%. Therefore, careful consideration must be made when investing in this account so as to ensure that the amount invested does not attract taxation.
• Repatriation: NRO fixed deposits do not offer the option to repatriate funds, especially on the principal investment. However, the interest earned from the NRO fixed deposit can be transferred to another foreign account.
• Joint account: The NRO account can comprise of a single or joint account holders. However, an NRI account holder can hold a joint NRO account only with an Indian resident citizen.
• Deposit and withdrawal: Funds that have originated from India can only be used to open an NRO account, which in turn can be used to open an NRO fixed deposit. However, no funds from abroad can be used to open the NRO fixed deposit. But, funds from an NRE account can be transferred to the NRO account in order to open a fixed deposit account. If the account holder would want to withdraw funds from the account, it can only be withdrawn in Indian rupees.
• Interest rates: The interest rate involved in the NRO fixed deposit account will differ according to the current market conditions, as well as the bank you are applying in. Therefore, before opening the account, you must first check the available rates to know which the best one to suit your needs is. The maturity of such a deposit can last anywhere between a year to 20 years.