Fixed Deposits for NRIs – Everything You Need to Know (2026)

“Mani, I have $50,000 sitting idle in my US bank account earning 0.5% interest. Should I put it in an Indian FD?”

I get asked this question at least five times a week in our WhatsApp community.

And the honest answer? It depends.

It depends on which type of FD you choose (NRE, NRO, or FCNR).

It depends on whether you plan to bring the money back. It depends on your tax situation.

And increasingly in 2026, it depends on whether you’ve heard about GIFT City FDs.

I’ve seen NRIs earn 7%+ tax-free returns on their foreign income through NRE fixed deposits.

I’ve also seen NRIs lose money because they didn’t understand TDS rules on NRO FDs or got hit by currency fluctuations.

Let me walk you through everything – clearly and practically – so you can make the right decision for your situation.

The 4 Types of NRI Fixed Deposits

Before anything else, let’s understand the four types of FDs available to NRIs. Each one works very differently.

Feature	NRE FD	NRO FD	FCNR FD	GIFT City FD
Currency	INR (converted from foreign currency)	INR	Foreign currency (USD, GBP, EUR, etc.)	Foreign currency (USD, GBP, EUR, etc.)
Source of funds	Foreign earnings only	Indian or foreign income	Foreign earnings only	Foreign earnings
Interest rates (2026)	6.0% – 7.25% p.a.	6.0% – 7.10% p.a.	2% – 5.45% p.a. (USD)	4% – 5.5% p.a. (USD)
Tax in India	Fully tax-free	30% TDS on interest	Fully tax-free	Fully tax-free
Repatriation	Fully repatriable (principal + interest)	Up to USD 1 million/year	Fully repatriable	Fully repatriable
Minimum tenure	1 year	7 days	1 year	7 days
Maximum tenure	10 years	10 years	5 years	39 months (varies)
Currency risk	Yes (INR fluctuation)	Yes	No	No
DICGC insurance	Up to ₹5 lakh	Up to ₹5 lakh	Up to ₹5 lakh	Regulated by IFSCA

This table is the foundation. Keep it handy. Now let me break each type down in simple language.

NRE Fixed Deposits – The Most Popular Choice

NRE stands for Non-Resident External. This is where most NRIs park their foreign earnings in India.

How it works: You send your dollars (or pounds, dirhams, etc.) to India. The bank converts them to Indian Rupees at the prevailing exchange rate. That INR amount sits in your NRE FD and earns interest.

Why NRIs love NRE FDs:

The interest is completely tax-free in India. No TDS. No income tax. Zero.

Both principal and interest are fully repatriable. You can take it all back abroad whenever you want.

Interest rates in India (6% – 7.25% in 2026) are significantly higher than what you’d earn in a US savings account (around 0.5% – 4.5%).

The catch – currency risk:

Here’s what many NRIs don’t think about. When you deposit dollars into an NRE account, the bank converts them to rupees. When you eventually withdraw, you convert back to dollars.

If the rupee weakens during your FD tenure, you lose money in dollar terms – even though you “earned” 7% interest.

Example: You deposit $10,000 at ₹83/USD. That’s ₹8.3 lakh. After 3 years at 7% interest, you have roughly ₹10.17 lakh.

But if the rupee has weakened to ₹90/USD by then, your $10,000 has become approximately $11,300. Your effective dollar return is about 4.2% per year.

Not bad. But not the 7% you thought you were getting.

If you’re looking for context on how money transfers to India work, we have a detailed guide.

NRE FD rates at major banks (early 2026):

Bank	1 Year	2-3 Years	3-5 Years	5+ Years
HDFC Bank	6.60%	7.00% – 7.25%	7.00%	6.50%
ICICI Bank	6.60%	7.00%	7.00%	6.50%
SBI	6.50%	6.45%	6.30%	6.05%
Axis Bank	6.75%	7.10% – 7.25%	7.00%	6.50%

Note: Rates are indicative and change frequently. Always verify on the bank’s website before investing.

Important NRE FD rules:

• Minimum tenure is 1 year. No exceptions.
• If you break the FD before 1 year, you get zero interest. Nothing.
• Senior citizen extra rates do NOT apply to NRIs. This surprises a lot of people.
• Joint holding is allowed, but only with another NRI. Not with a resident Indian.

For choosing the right bank for your NRE deposits, check our banking comparison guide.

NRO Fixed Deposits – For Indian Income

NRO stands for Non-Resident Ordinary. This is for money you earn in India – rent from property, dividends, pension, sale proceeds, etc.

How it works: Your Indian income goes into the NRO account, and you can create an FD from it.

Key differences from NRE:

Interest on NRO FDs is taxable. The bank deducts 30% TDS (Tax Deducted at Source) on the interest earned. That’s a significant hit.

Repatriation is limited to USD 1 million per financial year. For most NRIs, this isn’t a constraint. But if you’ve sold property or inherited a large sum, this matters.

NRO FD rates are usually similar to domestic FD rates. In many banks, they’re identical to what resident Indians get.

Can you reduce the 30% TDS?

Yes, there are two ways:

1. DTAA (Double Taxation Avoidance Agreement): India has tax treaties with many countries. If you provide a Tax Residency Certificate (TRC) from your country of residence plus Form 10F, the TDS can be reduced. For US residents, the rate can come down to 15% under the India-US DTAA.

2. File an ITR: If your total Indian income is below the taxable limit, you can file an income tax return and claim a refund of the excess TDS.

For more details on this, our DTAA guide for NRIs explains the process step by step.

When should you use NRO FDs?

When you have rental income from Indian property and want to park it safely. If you’re collecting pension or dividends in India. When you’ve sold assets in India and need to park the proceeds temporarily before repatriating.

If you earn rental income in India as an NRI, understanding NRO FDs is especially important.

FCNR Fixed Deposits – No Currency Risk

FCNR stands for Foreign Currency Non-Resident. This is the FD for NRIs who want zero currency risk.

How it works: You deposit your money in foreign currency (USD, GBP, EUR, CAD, AUD, or JPY). It stays in that currency throughout the tenure. You get it back in the same currency.

No conversion to rupees. No currency risk. Simple.

Why consider FCNR?

If you plan to use the money abroad later (kids’ college fees, retirement in the US, etc.), FCNR protects you from rupee depreciation. Interest is completely tax-free in India, just like NRE FDs.

The downside – lower interest rates:

Because you’re not taking on any currency risk, the returns are lower. FCNR rates for USD are typically 2% – 5.45% depending on the bank and tenure.

Tamilnad Mercantile Bank has been offering around 4.80% on 1-year USD deposits – among the highest in early 2026. Yes Bank has offered up to 5.15% for 2-3 year tenures.

FCNR tenure: 1 year minimum, 5 years maximum. This is shorter than NRE or NRO FDs.

Who should use FCNR?

NRIs who are extremely risk-averse about currency fluctuations. Those who know they’ll need the money in foreign currency in the future. NRIs from the UAE or other countries where the local currency is pegged to USD and want to avoid any conversion risk.

GIFT City FDs – The New Kid on the Block

This is the option that’s getting a lot of buzz in the NRI community. And for good reason.

What is GIFT City?

GIFT City (Gujarat International Finance Tec-City) is India’s first International Financial Services Centre (IFSC), located in Gujarat. It operates under special regulations set by IFSCA (International Financial Services Centres Authority).

For financial purposes, GIFT City is treated as “foreign territory” under FEMA. This creates some unique advantages.

Why GIFT City FDs are attractive:

Deposits are in USD (or other foreign currencies) – no currency conversion needed.

Interest rates of 4% – 5.5% on USD deposits – higher than typical US bank savings rates.

Completely tax-free in India – no TDS, no income tax.

Fully repatriable – no USD 1 million annual limit like NRO accounts.

FDs available from as short as 7 days to 39 months – more flexible than FCNR’s 1-year minimum.

Banks offering GIFT City FDs:

Major Indian banks like SBI, HDFC, ICICI, Axis, and Kotak have IFSC Banking Units (IBUs) in GIFT City. International banks like HSBC also operate there.

Axis Bank allows digital booking of GIFT City USD FDs through their mobile app. The minimum deposit is USD 1,100, going up to USD 10 million.

How to open a GIFT City FD:

You need to open a Global Savings Account with an IFSC Banking Unit. Most banks now offer video KYC, so you don’t need to visit India. You transfer USD directly to your GIFT City account via SWIFT. Then you book your FD.

The honest take from our community:

GIFT City FDs are relatively new. The infrastructure is solid and the regulations are sound. But some NRIs in our groups still prefer the familiarity of NRE FDs at banks they’ve used for years.

My suggestion? Start small. Try a GIFT City FD with a smaller amount. Get comfortable with the process. Then scale up if it works for you.

For those looking at broader investment options beyond FDs, check our guide on the best investment options for NRIs.

Head-to-Head Comparison – Which FD is Right for You?

Let me simplify the decision:

Choose NRE FD if:

• You want high INR returns (6.5% – 7.25%)
• You’re okay with currency risk
• You want tax-free returns
• You need full repatriation flexibility
• You plan to eventually use the money in India (buying property, retirement expenses, etc.)

Choose NRO FD if:

• You have Indian income (rent, dividends, pension)
• You need a safe place to park that income
• You don’t mind the 30% TDS (or are willing to claim DTAA benefits)

Choose FCNR FD if:

• Currency protection is your top priority
• You’ll need the money in foreign currency later
• You’re okay with lower returns (2% – 5.45% for USD)
• You want tax-free, fully repatriable returns

Choose GIFT City FD if:

• You want higher USD returns than FCNR (4% – 5.5%)
• You want tax-free, fully repatriable returns in USD
• You like the idea of short-tenure FDs (even 7 days)
• You’re comfortable with a newer banking platform

Tax Implications – The Part Most NRIs Get Wrong

This is where things get tricky. Let me lay it out clearly.

In India:

FD Type	Tax in India
NRE FD	Tax-free. No TDS. No ITR filing needed for this income.
NRO FD	30% TDS on interest. Can be reduced via DTAA or ITR refund.
FCNR FD	Tax-free. No TDS.
GIFT City FD	Tax-free. No TDS.

In your country of residence – this is what people miss:

Just because NRE or FCNR interest is tax-free in India doesn’t mean it’s tax-free in your country. Most countries tax their residents on global income.

If you’re in the US: You must report all Indian FD interest income on your US tax return. NRE, NRO, FCNR, GIFT City – everything. The US taxes you on worldwide income regardless of where it’s earned or whether it’s taxed in India.

However, you can claim a Foreign Tax Credit for TDS paid on NRO FDs, which helps avoid double taxation.

If you’re in the UAE: No personal income tax in the UAE. So NRE and FCNR FD interest is genuinely tax-free – both in India and in the UAE. This makes UAE-based NRIs some of the biggest beneficiaries of Indian FDs.

If you’re in the UK: You need to report global income to HMRC. DTAA benefits apply to prevent double taxation.

For US-based NRIs, our US NRI tax filing guide covers how to report Indian income properly.

The FBAR angle (for US NRIs):

If your Indian bank accounts (including FDs) have an aggregate value exceeding $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114). This is separate from your tax return and has severe penalties for non-compliance.

Details on this are in our FBAR guide for NRIs.

How to Open an NRI FD – Step by Step

Step 1: Have an NRE or NRO savings account

You can’t open an NRI FD without first having the corresponding savings account. Most major banks allow NRIs to open NRE/NRO accounts online or through their NRI banking desks.

You’ll need your passport, visa, overseas address proof, and PAN card (or Form 60 if you don’t have a PAN).

Step 2: Fund the account

For NRE: Transfer money from abroad via wire transfer, SWIFT, or online remittance services. The bank converts it to INR.

For NRO: Deposit Indian income. You can also transfer from abroad, but it gets converted to INR and treated as NRO funds.

For FCNR: Transfer foreign currency. The bank holds it in the original currency.

Step 3: Create the FD

Most banks allow FD creation through internet banking or mobile apps. Select your tenure, choose between cumulative (reinvest interest) or non-cumulative (periodic payouts), and confirm.

Step 4: Get your FD receipt

The bank issues a digital or physical FD receipt. Keep this safe for tax purposes.

Documents typically needed:

• Valid passport with visa pages
• Overseas address proof (utility bill, bank statement, driving license)
• PAN card or Form 60
• Passport-size photographs
• Proof of NRI status (visa, employment letter, etc.)

If you don’t have a PAN card yet, our guide on PAN card application for NRIs can help.

Smart Strategies Our Community Uses

Over the years, NRIs in our groups have shared strategies that work. Here are the most practical ones:

1. Ladder your FDs

Instead of putting ₹20 lakh in one FD, split it into four FDs of ₹5 lakh each with tenures of 1, 2, 3, and 4 years. As each one matures, reinvest at the current rate. This gives you both liquidity and the ability to capture rate changes.

2. Lock in high rates before they drop

When interest rates are high (like now in 2026), booking longer-tenure NRE FDs locks in that rate for the full period. If RBI cuts the repo rate, new FD rates will drop – but your existing FD keeps the higher rate.

RBI held the repo rate steady at its February 2026 meeting, but rate cuts are anticipated later in the year. This is the time to lock in.

3. Use FCNR for education planning

If your child will attend college abroad in 3-5 years, FCNR deposits protect that education fund from currency fluctuations. You know exactly how many dollars you’ll have at maturity.

4. Combine NRE + GIFT City

Keep some money in NRE FDs for higher INR returns (when you’re bullish on the rupee or plan to use money in India) and some in GIFT City USD FDs for dollar-denominated, tax-free returns. Diversification works for FDs too.

5. Don’t ignore the loan-against-FD option

Most banks offer loans up to 90% of your NRE FD value. If you need money urgently, take a loan against the FD instead of breaking it. You keep earning interest on the full FD amount while paying a slightly higher rate on the loan.

What Happens to Your FDs When You Return to India?

This is critical for our community. If you’re planning to move back, here’s what changes:

NRE FDs: You must re-designate them as resident FDs. The good news – the bank typically lets them continue at the same interest rate until maturity. You don’t have to break them.

During your RNOR (Resident but Not Ordinarily Resident) period (usually 2-3 years after return), the interest on these re-designated FDs remains tax-free.

Once you become a regular resident (ROR), the interest becomes fully taxable at your slab rate.

NRO FDs: These convert to regular resident FDs. Interest continues to be taxable, but now at your slab rate instead of the flat 30%.

FCNR FDs: Can continue until maturity. But you cannot renew them as a resident. After maturity, transfer proceeds to a resident savings account or an RFC (Resident Foreign Currency) account.

RFC Account – the smart move:

An RFC account lets you hold foreign currency in India after returning. It’s designed specifically for returning NRIs. You can transfer your NRE and FCNR balances into an RFC account instead of converting everything to rupees immediately.

Why this matters: Exchange rates fluctuate. Converting everything at once might mean locking in a bad rate. RFC gives you the flexibility to convert gradually.

Our detailed guide on converting NRE/NRO accounts walks you through the full process.

Common mistakes returning NRIs make with FDs:

Converting everything to INR immediately instead of using RFC accounts. Not informing the bank about their status change (banks don’t detect this automatically).

Breaking FDs prematurely and losing contracted interest rates. Not planning around the RNOR window to maximize tax-free interest.

For the complete picture on financial planning around your return, see our financial checklist for returning NRIs.

Small Finance Banks – Higher Rates, Higher Questions

Some NRIs are tempted by small finance banks offering 8% – 9% on FDs.

Banks like Suryoday Small Finance Bank (up to 9.01%), Unity Small Finance Bank (up to 9.00%), and Jana Small Finance Bank (up to 8.50%) offer significantly higher rates than SBI or HDFC.

Should NRIs use them?

Here’s the balanced view:

The case for: They’re regulated by RBI. All deposits up to ₹5 lakh per depositor per bank are insured by DICGC. The rates are genuinely higher.

The case against: Not all small finance banks offer NRE/NRO FD products. Online access from abroad can be limited. Branch networks are smaller. If something goes wrong, resolving it from overseas is harder.

My practical suggestion: If you’re considering a small finance bank, keep your deposit under ₹5 lakh per bank (the DICGC insurance limit). Use them for a portion of your FD portfolio, not all of it. And check beforehand whether the bank offers NRE FDs specifically – not all do.

Premature Withdrawal – What You Need to Know

Life happens. You might need to break your FD before maturity.

NRE FDs: If broken before 1 year, you get ZERO interest. After 1 year, a penalty of 0.5% – 1% is typically charged on the applicable rate. Some banks like HDFC charge 1% penalty on premature withdrawal of NRE FDs.

NRO FDs: Can be broken anytime (even before 1 year for tenures above 7 days). Penalty of 0.5% – 1% applies.

FCNR FDs: Premature withdrawal is allowed. Some banks like Yes Bank charge no penalty for withdrawal before 1 year. Others charge a reduced rate.

GIFT City FDs: Premature withdrawal allowed with a small penalty (Axis Bank charges 0.15% reduction from the booked rate).

Pro tip: Before opening an FD, check the premature withdrawal penalty for that specific bank. This varies and can make a real difference.

Interest Rate Outlook – What’s Coming in 2026?

RBI held the repo rate at its February 2026 meeting. But markets widely expect rate cuts later in 2026 as inflation moderates.

What this means for NRI FDs:

If RBI cuts rates, new FD rates will fall. Banks usually reduce deposit rates within weeks of a repo rate cut.

For NRIs, this is a signal to lock in current rates, especially for longer tenures. A 7%+ NRE FD locked in now will continue earning that rate even if new FDs drop to 6.5% or lower.

Some banks offer special tenure FDs with slightly higher rates. HDFC Bank’s special 33-month and 55-month FDs, for instance, often carry premium rates. Keep an eye on these.

Frequently Asked Questions

Can I open an NRI FD without visiting India?

Yes. Most major banks (SBI, HDFC, ICICI, Axis) allow NRIs to open accounts and create FDs online. Some require video KYC. For GIFT City accounts, the entire process can be done remotely.

Is my NRI FD safe? What if the bank fails?

DICGC insures deposits up to ₹5 lakh per depositor per bank. This covers all your deposits at that bank combined – savings, FDs, recurring deposits. If you have more than ₹5 lakh, spread across multiple banks for safety.

Do NRI senior citizens get extra interest on FDs?

No. This is a common misconception. The senior citizen premium (usually 0.25% – 0.50% extra) applies only to resident Indian senior citizens. NRIs don’t get this benefit regardless of age.

Can I have a joint NRE FD with my spouse who is a resident Indian?

No. NRE accounts and FDs can only be held jointly with another NRI. For joint holding with a resident Indian, you’d need an NRO account.

What’s the minimum amount for an NRI FD?

This varies by bank. SBI requires a minimum of ₹1,000 for NRE FDs. HDFC and ICICI also have relatively low minimums. For GIFT City, Axis Bank requires a minimum of USD 1,100.

Can I get a monthly income from my NRI FD?

Yes, through non-cumulative FDs. You can choose monthly, quarterly, or annual interest payouts. The rate for non-cumulative (payout) FDs is typically slightly lower than cumulative FDs due to the compounding difference.

What happens if I overstay in India and my NRI status changes?

Once you become a resident under FEMA (generally when you stay in India for more than 182 days with intent to stay), you must convert your NRE/NRO accounts to resident accounts. Your existing FDs can typically run until maturity, but you must inform your bank about the status change promptly.

Can NRIs from the US invest in Indian FDs?

Yes, absolutely. But US NRIs must report the interest income to the IRS, report accounts over $10,000 via FBAR, and may need to file FATCA declarations. Some banks are more NRI-friendly for US residents than others – SBI and ICICI have dedicated US operations.

We have detailed guides on SBI branches in the USA and ICICI Bank branches in the USA if that helps.

My Practical Advice

After years of watching NRIs navigate the FD landscape, here’s what I tell people:

Start with NRE FDs if you’re earning abroad and want high, tax-free returns in India.

Accept the currency risk if you plan to use the money in India eventually. It’s the simplest, most rewarding option for most NRIs.

Use FCNR or GIFT City FDs for money you’ll need in dollars later.

College funds, retirement corpus, emergency reserves – these should be protected from currency fluctuations.

Don’t chase the highest rate blindly.

A 0.25% difference between banks matters less than having a bank that’s easy to deal with from abroad. Online access, responsive NRI desk, smooth KYC – these matter more than you think.

Keep your FD documentation organized.

Interest certificates, TDS certificates, account statements – you’ll need these for tax filing in both countries.

And if you’re planning to return to India, start thinking about your FD strategy at least 6-12 months before the move. Understanding RFC accounts, the RNOR window, and account conversion rules can save you lakhs in taxes.

For the broader financial picture of returning, our return to India checklist covers everything from banking to investments to insurance.

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If you have questions about NRI FDs or want to hear what other NRIs are doing with their money, join our WhatsApp community at https://backtoindia.com/groups – 20,000+ NRIs helping each other with real, lived experience. It’s free and volunteer-run.

Disclaimer: Interest rates and tax rules mentioned in this article are based on publicly available information as of early 2026 and are subject to change. Always verify current rates on official bank websites before investing. This article is for informational purposes only and should not be treated as financial or tax advice. Please consult a qualified financial advisor or chartered accountant for decisions specific to your situation.