How NRIs can Invest in NRO Tax Saver Fixed Deposit for Tax Saving under 80C

If you are an NRI and have income in India like rental income and your annual income is more than 2.5 lakh, the basic exemption limit then you can reduce your taxable income by investing in an NRO tax saver fixed deposit. NRO tax saver Fixed Deposit has 5 year lock-in period and it will be eligible for tax deduction under Section 80C of Income Tax Act, 1961. Investment in NRO tax saver FD also given NRIs an opportunity to diversify their investments in addition to other investments permitted in Section 80C like ELSS, PPF(Public Provident Fund), NSC (National Savings Certificate), or NPS (National Pension Scheme). 

By the way, As per section 115D of the Income Tax Act, the benefit under Section 80C is available to an NRI only if he has earned income other than investment income (interest) and long-term capital gains e.g. rental income or royalty or income earned by selling a property. 

Many banks from both the public and private sector allow NRI to open NRO tax saver fixed deposits like  HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and other banks

Top 10 Features and Benefits NRO Tax Saver Deposit

Here are the main features and benefits of opening an NRO Tax Saver Deposit in India, by the way, this condition likes minimum amount is different across different banks like ICICI bank will have different limit than SBI, etc. 

• Minimum Amount: Rs.25,000/-
• Multiples of Rs.100/-
• Maximum Amount: Rs. 1.5 lakhs(in an FY)
• Tenure-5 years (lock-in period)
• A monthly or quarterly interest pay-out option is available
• No partial/premature withdrawal allowed
• Sweep-in not allowed
• No OD or pledge allowed
• Fixed Deposit can be opened in single or joint name but the tax benefit can be claimed only by the first account holder

1. Eligibility

You are eligible if you are a non-resident individual of Indian nationality or of Indian origin

Upon change of your status from NRI to RI, you need to inform the Bank immediately

2. Interest rate

As per prevailing 5-year deposit rates, it's around 5%, you can check individual bank websites to find out the latest NRO Fixed Deposit interest rates of 7.65%.

3. TDS

Interest earned on NRO Savings Account / NRO Fixed Deposit is subject to tax deduction at source*. With effect from August 2009, applicable TDS rates are:

As per section 206AA introduced by Finance (No. 2) Act, 2009 with effect from 01.04.2010, every person who receives income on which TDS is deductible shall furnish his PAN Number to the deduct or, failing which TDS shall be deducted at the maximum marginal rate or 30.90% whichever is higher.

Interest on Deposit Tax Rate Surcharge Education Cess Total

NRO 30% - 3% 30.90%

That's all about NRO Tax Saver Fixed Deposit. It's a great investment option for NRIs who have income generated from India like rental income. Instead of keeping them on a saving account, you can put them into NRO fixed deposit to earn more interest. You can also transfer it to an NRE account or abroad if you want as we have discussed earlier. 

Other articles, you may like to explore:

• How to open an NRE/NRO account from Singapore? (see)
• The best way to transfer money from Singapore to India? (read)
• Sending Money to India? Always compare SGD to INR rates between DBS IndiaRemit, MoneyToIndia, Remit2India, etc (see)
• How does NRIs living in Singapore can exchange old Rs 500 and Rs 1000 notes? (article)
• How to open NRE/NRO saving account online from Overseas? (article)
• How NRIs can use DTAA to avoid double taxation? (article)
• Can you transfer funds from NRE to the FCNR account? (answer)

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