How NRIs can make the best use of NRE and NRO recurring bank deposits in India?

Updated: Saturday, August 30, 2014, 11:34 [IST]

If you think as a Non Resident Indian (NRI) it is a cumbersome process to open a NRE Recurring Deposit or a NRO Recurring Deposit in India, think again. It's easy and extremely convenient, pushing you to save systematically each month.

At the outset we wish to emphasize that do not invest in NRO Recurring Deposits since they are very much taxable and go for the NRE Recurring Deposits, which are tax free. Of course, you can do so, only if you have remitted money from another NRE account or from abroad.

In any case, let's highlight the features and quick benefits of the NRE and NRO Recurring Deposits in India.

a) How to invest?

You can open an account online and most of the applications are available online. Just specify the amount that you need to invest every month and make sure you have the balance in your NRE or NRO savings account as the case maybe on the day the debit takes place.

b) Make sure you begin the deposit by 5th and beyond

We are suggesting 5th and beyond, because we are assuming that you are working individual abroad who gets his salary around the 1st. This means that you would need some days to find time to visit the bank or exchange house abroad from where you would remit money into your NRE Savings or NRO Savings, which would later be debited and credited to your recurring deposit account.

c) Convenient

Everything is done online, so it is extremely convenient. Also, if you are not comfortable with plans like Systematic Investment Plans from Mutual Funds or other complex instruments, NRE and NRO Recurring deposits are the best bet.

d) Interest on NRE Recurring Deposits are tax free

The interest earned on NRE Recurring Deposits are tax Free. As indicated earlier, NRO Recurring Deposits are not tax free and a tax is levied at the rate of 30 per cent, plus cess.

e) NRE Recurring Deposits are freely repatriable

The amounts along with principal and interest in the case of NRE Recurring Deposits are freely repatriable. What this means is you can remit the money from India to your country of residence without any questions being asked. This would help you in case of emergencies in the country of your residence.

f) Interest rates are healthy at the moment

At the moment one gets a very good interest rates on these deposits at around 9 per cent. This means that if interest rates fall, you need not worry, if you have opened a recurring deposit for 2-3 years. Interest rates are in line with NRE and NRO Fixed Deposits.

Individuals must be committed

The only hassle with these deposits are when you are not able to meet your obligation. Some banks levy charges for delay in payments with regards to NRO and NRO Recurring deposits. But, despite these, most of the benefits offered from these including convenience, interest rates and tax benefits outweigh this negative.

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