NRE or non-resident external deposits are designed exclusively for the non-resident Indian community, serving as a financial tool that enables NRIs to keep their foreign earnings in rupee-denominated accounts. According to reports from The Economic Times, these deposits offer interest rates ranging from 5-7% per annum across various banks in India. The interest is applicable on fixed deposits with a tenure of one year or more, with rates varying depending on the specific tenure chosen by the depositor.
A key advantage of NRE deposits is that interest earned does not attract any tax deduction at source (TDS). As reported by The Economic Times, both principal as well as interest payment are fully tax-exempt in India. This makes NRE deposits particularly attractive for NRIs seeking to maintain their foreign earnings in rupee-denominated accounts while avoiding tax implications on their Indian investments.
In case of premature withdrawal of the entire deposit amount before the minimum tenure of one year for NRE FDs, no interest will be paid. According to The Economic Times, if premature withdrawal occurs after one year, interest will be paid for the period the deposit remained with the bank at the rate applicable at the time of booking for the actual tenure of the Term Deposit, not at the contracted rate. The applicable premature withdrawal penalty will also be deducted, and any excess interest paid at the contracted rate will be recovered from the principal amount.
Major banks offer competitive rates for NRE deposits, with State Bank of India providing 6.05-6.45%, Union Bank of India offering 6-6.6%, and Canara Bank providing 5-6.2%. As reported by The Economic Times, Punjab National Bank offers 6-6.3%, while HDFC Bank provides 6.15-6.5%. ICICI Bank offers 6.25-6.5%, Axis Bank provides 6.25-6.45%, and Kotak Mahindra Bank offers 6.25-6.8%. IndusInd Bank leads with rates of 6.5-7% for NRE deposits.
Interest on NRI Fixed Deposits is calculated based on the deposit amount, tenure, and applicable interest rate, with customers able to choose payout options including cumulative (paid at maturity), quarterly or monthly interest. According to The Economic Times, monthly payouts are typically offered at a slightly discounted rate. The interest amount is calculated following standard banking practices for FDs, with rates applying to fixed deposits below ₹3 crore.
