NRE FDs vs Debt Mutual Funds: Which Is Better for NRIs?

Yes, an NRI can invest in debt mutual funds in India. You can simply apply for it online. For this, you need to open an NRE or NRO account, complete your KYC, choose the debt mutual fund investment options, and start investing in them.

Yes, under section 10(4) of the Income Tax Act, 1961, for NRIs, NRE FDs are completely tax-free in India. Considering this, banks do not deduct any tax deducted at source on the income from NRE FDs.

To avoid TDS on FD as an NRI, you need to open an NRE or FCNR account. These accounts provide tax-free interest on investment to NRIs.

Generally, NRE FDs are safer for NRIs as they offer guaranteed and fixed returns with principal and interest amount fully secure and tax-free in India. On the other hand, debt mutual funds invest in securities and bonds, providing potentially higher returns with low to moderate market risk due to credit and interest rate fluctuations.

Yes, NRIs in the USA and Canada can invest in debt mutual funds. However, they face some extra FATCA compliance, limiting them to choose AMC that accepts Canada/ US investors who, via NRE/ NRO accounts, provide extra declarations, requiring careful checks with AMC and offline processes.