NRI Income Tax & Compliance

NRE Fixed Deposits: Eligibility, Benefits, NRE FD Rate, and More

Shubham Jain
Written by Shubham Jain
Updated on: July 2, 20265 mins Editorial Standards
NRE Fixed Deposits

For NRIs, managing finances in India has often been a daunting task. Additionally, in today's financial landscape, diversification is the way to secure and grow your hard-earned income. In this, for NRI, NRE fixed deposits (FDs) provide a rewarding solution. It not only provides them security but also has an attractive NRE FD rate, preferential tax treatment, and repatriation flexibility.

Want to know more about NRE FDs and how they benefit NRIs in saving their hard-earned money? This blog provides you with all the information. So read on and resolve all your doubts.

Key Takeaways
  • NRE Fixed Deposits let NRIs securely invest their foreign earnings in Indian Rupees.
  • Interest earned on NRE FDs is completely exempt from Indian income tax, and no TDS is deducted on the interest amount.
  • Both the principal amount and the earned interest can be transferred freely to your resident country without any restriction.
  • Tenure terms generally range from 1 to 10 years, allowing you to choose as per your liquidity needs and financial goals.
  • Most Indian banks allow you to take a loan or overdraft facility against your NRE FDs.

What are NRE Fixed Deposits (FDs)?

NRE FDs are a type of fixed deposit account offered by Indian banks. These are specifically designed for NRIs. The deposits in this account are maintained in Indian Rupees, but the amount is completely funded by foreign earnings. Considering this, you can remit funds from your foreign bank account, and the interest and principal amount can be repatriated fully without any limitation. Additionally, the interest earned in this account is exempt from taxes in India.

This was all about NRE fixed deposits (FDs). Moving ahead, let's know the eligibility criteria to invest in an NRI account fixed deposit in India.

Who Can Invest in NRE Fixed Deposit?

As mentioned earlier, NRE fixed deposits are designed by Indian banks for a specific category of individuals. It includes:

  • NRIs and PIOs: NRIs and Persons of Indian Origin are eligible to open an NRE fixed deposit account in India.
  • HUFs and Corporations: Under specific conditions, Hindu Undivided Families (HUFs) and certain corporates can also invest in NRE FDs.

So, here is who can invest in NRI fixed deposits in India. Moving further, let's know the benefits of investing in this NRI account fixed deposit in India.

Benefits of NRE Fixed Deposits for NRIs

For NRIs who want to keep their foreign earnings in India while earning stable returns on them, an NRE fixed deposit is a popular option. There are several benefits of NRE deposits, making it suitable for NRIs looking for both flexibility and safety.

  • Tax-Free Interest Earnings: One of the biggest benefits of NRE fixed deposits is that the earned interest in this account is tax-free in India. Additionally, the principal amount in a fixed deposit in an NRE account is not taxable in India under tax laws.
  • Attractive Interest Rates: Compared to other investment options, NRIs get the highest interest rate on NRE FDs in India. Considering this, the interest rates in India for NRE fixed deposits are more than the rates available on deposits in many developed countries. This helps NRIs to grow their savings while maintaining the safety of their capital.
  • Full Fund Repatriation: As mentioned earlier, you can repatriate both principal and interest amounts fully to your overseas bank account without any restrictions.
  • Flexible Tenure Options: NRIs can select from multiple tenure options, depending on their liquidity needs and financial goals. The tenure period of NRE FDs generally ranges from 1 year to 10 years.
  • Safe and Regulated Investment: NRE fixed deposits are offered by Indian banks and regulated by the Reserve Bank of India (RBI). It further offers NRIs a reliable and secure investment environment.
  • Easy Fund Transfer: For investment, you can easily transfer funds from your overseas accounts in foreign currency into an NRE account and convert them into Indian rupees.
  • Loan Against Deposit Facility: Most Indian banks allow NRIs to take loans or overdrafts against their NRE fixed deposits. It further allows NRIs to access funds without prematurely breaking the deposit.
  • Joint Account Option: You can hold an NRI fixed deposit with another NRI. It further makes this investment option convenient for financial planning for the family.

These are some of the key benefits of NRE deposits for NRIs. Moving forward, let's know the NRE fixed deposit rates in India offered by different banks.

NRE Fixed Deposit Interest Rates in Different Indian Banks

The table below showcases the best NRE fixed deposit rates offered by Indian banks to NRIs according to different tenures:

Indian Banks 1 Year More than 1 year to 3 years More than 3 years to 5 years More than 5 years to 10 years
Axis Bank 6.70% p.a. 6.70% p.a. - 7.10% p.a. 7.10% p.a. 7.00% p.a.
Abhyudaya Co-operative Bank 6.60% p.a. 7.00% p.a. - 7.60% p.a. 6.25% p.a. 6.25 p.a.
Bank of Baroda NRE fixed deposit rates 6.80% p.a. 6.75% p.a. - 7.10% p.a. 6.75% p.a. 6.45% p.a.
Bank of India 6.80% p.a. 6.50% p.a. 6.00% p.a. 6.00% p.a.
Bank of Maharashtra 6.75% p.a. 6.50% p.a. 6.50% p.a. 6.50% p.a.
Canara Bank 6.80% p.a. 6.85% p.a. - 7.30% p.a. 7.40% p.a. 6.70% p.a.
City Union Bank 7.00% p.a. 6.50% p.a. 6.25% p.a. 6.25% p.a.
DCB Bank 7.10% p.a. 7.10% p.a. - 8.05% p.a. 7.40% p.a. 7.25% p.a.
Dhanlaxmi Bank 6.75% p.a. 6.50% p.a. - 7.50% p.a. 7.25% p.a. 6.60% p.a.
Federal Bank 7.00% p.a. 7.15% p.a. - 7.50% p.a. 7.10% p.a. - 7.40% p.a. 6.60% p.a.
IDBI Bank 6.80% p.a. 6.80% p.a. - 7.00% p.a. 6.50% p.a. 6.50% p.a.
Indian Bank 6.10% p.a. 6.70% p.a. - 7.10% p.a. 6.25% p.a.% 6.25% p.a.
Induslnd Bank 7.75% p.a. 7.25% p.a. - 7.99% p.a. 7.25% p.a. 7.00% p.a.
Indian Overseas Bank - 6.80% p.a. - 7.30% p.a. 6.50% p.a. 6.50% p.a.
J&K Bank 7.00% p.a. 7.00% p.a.  6.75% p.a. 6.50% p.a.
Karnataka Bank 7.50% p.a. 6.75% p.a. - -
Karur Vysya Bank 7.00% p.a. 7.00% p.a. 7.00% p.a. 6.25% p.a.
Kotak Mahindra Bank 7.10% p.a. 7.10% p.a. - 7.40% p.a. 7.00% p.a. 6.20% p.a.
Punjab National Bank 6.80% p.a. 6.80% p.a. - 7.00% p.a. 6.50% p.a. 6.50% p.a.
Punjab and Sind Bank 6.30% p.a. 6.00% p.a. - 7.45% p.a. 6.00% p.a. -
Saraswat Co-operative Bank 7.15% p.a. 7.00% p.a. - 7.50% p.a. 6.75% p.a. 6.75% p.a.
South Indian Bank 6.70% p.a. 6.50% p.a. - 7.40% p.a. 6.70% p.a. 6.00% p.a.
State Bank of India (SBI) NRE fixed deposit rates 6.80% p.a. 6.80% p.a. 6.50% p.a. 6.25% p.a.
Tamil Nadu Mercantile Bank 7.00% p.a. 6.75% p.a. - 7.10% p.a. 6.50% p.a. 6.50% p.a.
Thane Janata Shikari Bank 7.50% p.a. 6.50% p.a. - 7.50% p.a. 6.25% p.a. 6.25% p.a.
UCO Bank 6.50% p.a. 6.30% p.a. - 7.30% p.a. 6.20% p.a. 6.10% p.a.
Union Bank of India 6.80% p.a. 6.40% p.a. - 7.30% p.a. 6.50% p.a. 6.50% p.a.

These are fixed deposit rates for NRIs offered by Indian banks. Moving ahead, let's know the difference between an NRE account and an NRO account.

What is the Difference Between NRE and NRO Accounts?

The table below showcases the difference between an NRE account and an NRO account for NRIs:

Basis NRE Account NRO Account
Definition It is an account used to keep foreign earnings in India in Indian currency. It is an account used to manage income earned in India in Indian currency.
Taxation  Principal and interest amounts are tax-exempt in India. Interest earned in this account is taxable in India and subject to Tax Deducted at Source (TDS).
Reportability You can transfer both the principal and the interest amount freely abroad without any restrictions.  Funds in the NRO account can be transferred after paying applicable taxes. Additionally, in a financial year, you can transfer up to USD 1 million. 
Suitable For It is suitable for NRIs who want to invest or maintain their foreign income in India. This account type is suitable for NRIs who want to manage their income earned in India, such as rental income, capital gains, or dividends.
Holding Structure You can open an NRE account jointly with another NRI.  You can open an NRO account jointly with an NRI or a resident Indian (close relative only)
Deposits and Withdrawals Deposits in this account are made in foreign currency, but withdrawals are made in INR. Deposits in this account can be made in Indian or foreign currency; withdrawals are in INR. 
Fund Transfer Funds can be transferred to another NRE or NRO account.  Funds can only be transferred to another NRO account. 
Exchange Rate Risk An NRE account faces currency conversion risk as it deposits foreign currency. An NRO account does not face exchange rate fluctuation risk as deposits are primarily linked to Indian income. 

This was all about the difference between NRE and NRO bank accounts for NRIs in India.

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Final Thoughts

Lastly, NRE fixed deposits are a reliable and beneficial investment choice for NRIs looking to secure their returns on their foreign earnings. With tax benefits and flexibility, the NRE fixed deposit rates are also higher compared to other investment options in India, with minimal or no risk. Additionally, according to your financial goals and liquidity needs, NRE FDs provide you with different tenures. 

Further, if you want expert assistance in choosing the right NRI investment plan, you can connect with Savetaxs. From analyzing the best interest to helping in choosing the correct investment plan as per your financial needs, we help you at every step. So connect with us and simplify your investment journey in India.

Glossary
  • Capital: Capital, a Financial Term Used for Business Operations, Like Bank Accounts, Stocks, Assets, Etc.
  • Double Taxation Avoidance Agreement (DTAA): DTAA, an Agreement Signed Between the Countries to Avoid Double Taxation.
  • Direct Tax: Direct Tax, a Type of Tax Imposed on Income, Sales, or Property, Based on the Ability to Pay.
  • Advance Tax : Advance Tax is a Tax Paid in Advance, in Installments, During the Same Financial Year.
  • Assessment Year (AY): The Assessment Year is When Taxes on the Previous Year's Income Are Evaluated, Calculated, and Filed.
  • Exempt Income: Exempt Income, Non-taxable as Per the Income Tax Department, Like Agricultural Income, Etc.
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Note: This guide is for information purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.

About Author
Shubham Jain
Shubham Jain Founder & NRI Tax Advisor

Shubham Jain is the Founder of SaveTaxs and has extensive experience in Indian and NRI taxation. He advises individuals, NRIs, and businesses on tax filing, tax planning, capital gains, DTAA benefits, fund repatriation, and compliance matters. He regularly writes about taxation and related financial topics. His focus is on making complex tax concepts easy to understand. Through his articles, he helps taxpayers stay informed, avoid common mistakes, and stay compliant with Indian tax laws. See Full Bio

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Frequently Asked Questions

When you return to India permanently, you should notify this about your bank of your residential status change. Additionally, your NRE FD will no longer be eligible for NRI tax exemptions. Considering this, you either convert it to a Resident FD or transfer your funds to a Resident Foreign Currency (RFC) account.

An NRE fixed deposit account is held and maintained in INR. However, you can fund it using almost any convertible foreign currency. Further, common currencies to initiate these transfers include USD, EUR, GBP, CAD, JPY, and AUD. 

No, interest earned on NRE fixed deposit is completely tax-free in India. Additionally, the principal invested amount is also free from Indian taxes and does not attract any TDS.

Yes, you can take a loan against your NRE fixed deposit. It allows you to access funds without breaking your FD, meaning your money continues to grow.

Yes, the interest earned on an NRE fixed deposit is completely and freely repatriable. Both the principal and accrued interest can be transferred back to your resident country at any time without any restrictions.