Know The Difference Between NRE vs NRO vs FCNR Fixed Deposit.

 Fixed Deposits have always been a safe and profitable way of investing money. Indians have been using Fixed Deposits for decades to save and get more returns on their money, and now, even Non-Resident Indians can do the same with a range of NRI Fixed Deposit Accounts. There are three major categories of NRI deposits, each serving a different purpose. Let us understand what these deposits are and what purpose each of them serves.

NRE Fixed Deposit Account

A Non-Resident External (NRE) Fixed Deposit helps NRIs deposit their earnings in the currency of their country of residence. However, the currency is then converted into INR at the prevailing exchange rates. Once the money is deposited, it starts earning interest as per the applicable FD rates for a fixed tenure. Withdrawals from these deposits are made in INR. The best part about this account is that the interest earned on an NRE Fixed Deposit Account is not taxable in India.

This deposit is especially suitable for NRIs with families in India who are dependent on them since the returns from the deposit can be received in INR.

NRO Fixed Deposit Account

Unlike the NRE Fixed Deposit which lets you deposit earnings in the currency of their land of residence, a Non-Resident Ordinary (NRO) Deposit Account helps NRIs deposit their earnings in INR. The money deposited earns interest on INR as per the applicable FD rates for a fixed tenure. The interest earned on an NRO Fixed Deposit Account is taxable in India. This deposit is suitable for NRIs who have income coming from property leasing, dividends earned, and more.

FCNR Deposit

A Foreign Currency Non-Residential (FCNR) Account or FCNR account helps Non-Resident Indians and Persons of Indian Origin (POI) deposit money into their accounts in the currency of their country of residence. The money in the account can be held in the currency of your choice as prescribed by the RBI.

You can choose to deposit currencies earned in US Dollar (USD), Canadian Dollar (CAD), Australian Dollar (AUD), Singapore Dollar (SGD), Hong Kong Dollar (HKD), Great Britain Pound (GBP), Euro (EUR), Japanese Yen (JPY) and Swiss Franc (CHF) in your FCNR Account.

Any NRI with earnings in the above currencies can open an FCNR deposit and deposit the money without worrying about conversion. If an NRI earns in any other foreign currency, the money will be converted into one of the above currencies. What’s more, interest earned on these deposits is not taxable in India.

Now that we have understood what purpose each of these deposits serves, here’s a table that explains the differences between the three deposits.

 

Particular

NRE Deposit

NRO Deposit

FCNR Deposit

Deposit Currency 

Foreign Currency

Indian Rupee (INR)

Foreign Currency

Withdrawal Currency

Indian Rupee

Indian Rupee

Foreign Currency

Taxable in India

Not taxable in India

Taxable in India

Not taxable in India

Exchange Rate Risk

Open to risk due to fluctuating foreign exchange rate

No foreign exchange risk involved

No foreign exchange risk involved

Repatriability (Transferability)

Fully and freely repatriable

Interest is repatriable; transfer of principal amount comes with certain set limits

Fully and freely repatriable

 

NRE Deposit, NRO Deposit, or FCNR Deposit, which is a better option for NRIs?

The simple answer to this question is that there is no deposit better than the other. All three deposits serve different purposes, the only thing common among them all is that they serve Non-Resident Indians (NRIs).

And NRE Deposit Account is best-suited for NRIs who want to deposit the money earned in their land of residence in India and earn non-taxable returns on them. However, the withdrawal from the NRE Deposit will be in INR. An NRO Deposit Account is best-suited for NRIs who want to deposit their income from rent, dividends, and other income earned in INR. An FCNR Deposit is best-suited for those NRIs who want to deposit foreign currency, earn non-taxable returns and also withdraw in the foreign currency they deposited in.

SBM Bank India offers NRE Fixed Deposit, NRO Fixed Deposit, and FCNR Deposit with attractive interest rates, flexible tenure, tax-free returns on NRE and FCNR Deposits. 


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