As an NRI the first clarity you require is on how to invest and save your money existing in India. Creating a balance of investments between the two countries can be quite a task as you also need to worry about the pertaining taxation and the earnings from them. Different countries have varying tax regimes and it is essential to understand the differences between the important ones in India – the – NRE Account and NRO Account.
Differences between NRE and NRO Account
Let us look at the various differences with the help of the following table. You can easily see the functionality of both the accounts is different but it is recommended that you open both the accounts as you might need either one at specific times.
|Full Form||Non Resident External Account||Non Resident Ordinary Account|
|Purpose||NRI can transfer foreign earnings to India||NRIs can manage the income earned in India|
|Taxation||Interest earned is tax free||Interest earned is taxable|
|Repatriability||Can repatriate fully||Interest amount repatriate fully. Principle subject to certain set limits|
|Account Opening||2 NRIs can open||NRI along with an Indian citizen or another NRI|
|Deposits and Withdrawals||Deposits allowed in foreign currency with withdrawals in Indian currency as well as foreign||Deposit allowed in foreign as well as Indian currency but withdrawal only in Indian currency|
|Exchange Rate Risk||Open to exchange rate risk||Not open to exchange rate risk|
Thus if you wish to transfer your foreign income to India along with avoiding taxes, an NRE account is ideal. An NRO account is subject to Tax Deducted at Source as below –
If annual interest on deposit is less than Rs. 50 lacs- 31.2%
If annual interest on deposit is more than Rs. 50 lacs, but less than 1 Cr- 34.2%
If annual interest on deposit is more than 1 Cr- 35.88%
Alternative Investments for NRIs
As an NRI you should consider lucrative company FDs like Bajaj Finance FD which will allow you to track your investments with an online FD maturity calculator and also earn higher than what Indian banks are offering. Bajaj Finance FD currently offers up to 7.85% for 48-60 months cumulative FD and you can utilise your NRO account to invest and earn the interest. You can even claim tax benefits under DTAA (Double Tax Avoidance Agreement). You can look at receiving the following additional benefits:
Flexible Investment – As an NRI you can plan your deposits and choose a tenor from 12 to 60 months. The minimum deposit amount required is Rs 25,000.
Interest Rates – With an interest rate of 7.60% for new customers, you can gain additional 0.10% if you are a returning customer. Additionally, you can gain an additional 0.25% if you are a senior citizen
Stability – Bajaj Finance FDs have been accorded the highest credit rating of FAAA by CRISIL and MAAA by ICRA. This is one of the biggest advantages for a company FD and you are assured of liquidity and high returns.
Multi-Deposits – With a single cheque, you can create multiple deposits of varying amounts and tenor and reap the benefits across timelines. Such a strategy of laddering can help you to safeguard your portfolio from interest rate fluctuations, especially since it might be difficult for you to quickly make changes to your portfolio in accordance with the changing interest rates.