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NRIs who want to invest in India have ample opportunities for it. They can invest in the country for wealth appreciation and have an effortless and safe investment experience. The most widely used investment options for non-resident Indians are NRI insurance and NRI fixed deposits.
AN NRI can open a Non-resident Ordinary (NRO) account to invest in fixed deposits in India. An NRO fixed deposit account is subject to TDS, and the TDS on FD interest for NRIs is significant. Therefore, you must know the NRO tax* rate for FD interest to plan your investments prudently.
What is NRO Fixed Deposit?
An NRO fixed deposit account is an investment account denominated in Indian currency. An NRI can only open an NRO FD account with an NRO savings account. It can be an individual or a joint account.
Similar to regular fixed deposit schemes, an NRO FD offers fixed returns for low investment risk. However, the interest rate on an NRO FD may differ for various financial institutions. TDS on NRO fixed deposit accounts is applicable per income tax law.
The principal amount of an NRO FD is non-repatriable, but you can transfer the interest earned to an overseas account. Moreover, you can open an NRO FD account in India only using funds originating in the country. However, you can transfer funds from an NRE account to your NRO account and then invest them into an NRO FD.
Features of NRO Fixed Deposit
Investor: Only NRIs or People of Indian Origin can invest in an NRO FD scheme.
Duration: Usually, the tenure of an NRO FD is between 7 to 10 years. Most financial institutions allow you to have a nominee in the NRO FD. Additionally, there is a facility for auto-renewal here.
Minimum amount to open an NRO FD: The minimum amount with which you can open an NRO FD differs for various financial institutions. However, it usually falls between ₹ 25,000 to ₹ 50,000.
Nature of the account: You can open an NRO FD account individually in your name or jointly with a close relative or family member residing in India.
Withdrawal from an NRO FD: You may avail of a facility for premature withdrawals from your NRO FD account for a small penalty. The withdrawal can only be in the Indian currency.
Benefits of an NRO Fixed Deposit
Loan: Similar to regular FDs, you can pledge an NRO FD to avail of a loan in India. In most cases, you can get up to 90% of the FD amount as a loan without breaking your FD. The interest rate for a loan against FD is much lower than for an unsecured loan.
Attractive interest rates: NRO FDs usually have a reasonable interest rate for a low risk, and you can get preferential rates on remittances.
Easy management: NRO FDs do not require regular monitoring, unlike other investment options. Additionally, if you have a joint NRO FD account, the resident Indian joint account holder can manage the account on your behalf when you are overseas.
TDS Applicable on NRO Fixed Deposits
The TDS on FD interest for NRIs under an NRO account is 30%, with an additional surcharge and health and education cess of 4%. The surcharge is variable and increases as your income increases.
Total Interest Earned |
NRO Tax Rate |
Less than or equal to ₹50 Lakh |
31.2% (30% TDS + 0% Surcharge + 4% Cess) |
Between ₹50 Lakh and ₹1 Crore |
34.32% (30% TDS + 10% Surcharge + 4% Cess) |
Between ₹1 Crore and ₹2 Crore |
35.88% (30% TDS + 15% Surcharge + 4% Cess) |
Between ₹2 Crore and ₹5 Crore |
39% (30% TDS + 25% Surcharge + 4% Cess) |
Beyond ₹5 Crore (Old Tax Regime) |
42.74% (30% TDS + 37% Surcharge + 4% Cess) |
Can I Reduce the Income Tax Return for NRI FD?
You cannot avoid paying the income tax return on the interest income for your NRO FD scheme. However, India has a Double Tax Avoidance Agreement (DTAA) with over 75 other countries globally.
If you reside in any one of these countries, you can benefit from the provisions under DTAA. Here, an NRI has the freedom to choose to pay taxes as per the Indian income tax law or according to the provisions of the DTAA, whichever is more beneficial.
According to the DTAA provisions, you can enjoy a concessional TDS rate on your NRO FD interest earnings and ultimately increase your FD earnings. For this, you must obtain a Tax Residency Certificate from the tax or government authority of your country of residence.
The documents required to avail of benefits under the DTAA provisions are:
DTAA Annexure
Tax Residency Certificate
Self-attested copy of the PAN
Self-declaration Form 10F
The TDS applicable on an NRO FD is significantly high, especially if you are not eligible for the DTAA provisions.
A more tax-efficient way of investing your savings in India is by buying a life insurance policy for NRIs. You can get a deduction of up to ₹1.5 lakhs under Section 80C of the Income Tax Act, 1961, for the premium paid towards NRI life insurance plans. Additionally, the maturity amount or death benefit received from an NRI life insurance plan is tax-exempt under Section 10(10D) of the Income Tax Act.
Our Tata AIA policy for NRI life insurance offers you the dual advantage of tax benefits along with life coverage for your loved ones’ security. You can invest in the most suitable plan through a quick online process that does not require any paperwork.
To stay updated with the latest tax provisions and get personalised guidance based on your situation, it is advisable to consult a tax professional or advisor.
Wrapping Up
NRIs must pay taxes as per the Indian income tax law in the country on all the income generated in India. It includes the income earned in the form of interest on an NRO fixed deposit account. The NRO FD interest is charged at 30% TDS plus an additional surcharge and cess. You can reduce the tax payable on your FD interest by taking benefits under the DTAA provisions.
