NRE fixed deposit rates: Deutsche Bank, RBL Bank top with up to 8 percent interest rates on two-year tenor

Non-resident external (NRE) fixed deposits (FDs) are beneficial for non-resident Indians (NRIs)—those living abroad (expatriates), Indian citizens working overseas and individuals of Indian origin with foreign citizenship. The benefits to NRIs holding an NRE FD account are tax-free interest earnings in India, repatriation of principal and interest (to foreign countries), no tax deduction at source (TDS) and higher interest rates than NRE savings accounts.

NRE FDs provide a secure, tax-efficient way for NRIs to invest and manage their funds in India.

What is an NRE savings account?

An NRE savings account is a rupee-denominated account. It could be savings, foreign currency non-resident (FCNR) account, or a fixed deposit account. You can deposit your earnings from overseas or transfer funds from one NRE account to another NRE account and in certain cases, from a non-resident ordinary (NRO) account to an NRE account along with Form 15CA/CB. The foreign currency deposited into the NRE account gets converted into rupees.

NRE and NRO accounts cater to the different financial needs of NRIs. The primary difference lies in the source of income. NRE accounts are designed to manage foreign-earned income, whereas NRO accounts are meant for handling India-sourced income, such as salaries, rentals and dividends.

Another significant distinction is repatriation. NRE accounts allow full repatriation of both principal and interest, whereas NRO accounts permit partial repatriation of up to $1 million per year. Additionally, NRE accounts are tax-free in India, while NRO accounts are subject to Indian taxation as per the income-tax Act.

In terms of currency acceptance, NRE accounts only accept foreign currency, whereas NRO accounts accept both foreign and Indian currency. Overall, NRE accounts are ideal for NRIs with foreign income seeking tax-free returns, while NRO accounts suit those managing Indian income and local expenses.

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