7 Reasons to Convert Your Resident FDs Into an NRO deposit

Once your resident status changes to NRI, you must convert your resident FDs into NRO deposits

NRIs are always looking for the best investment plan in India. NRO fixed deposits are one of the best investment plans in India. Here are the reasons for you to convert your resident FDs into NRO deposits. 

Why change resident FDs to NRO deposits

1.     It is mandatory: As per the Foreign Exchange Management Act (FEMA) guidelines, NRIs cannot hold resident FDs. They must convert it to an NRO deposit account. There is a penalty if you do not get the conversion done. 

2.     Enjoy higher interest rates: NRO deposits will give you higher post-tax returns in India. The post-tax returns on NRE/ NRO savings accounts are lower. Interest rates on NRO deposits are the same as domestic deposits.

3. Enjoy tax benefits: Five-year-long NRO fixed deposits will be eligible for deduction u/s 80C of the Income Tax Act (I-T Act). However, section 115D of the I-T Act lays down some rules in this regard. Benefits u/s 80C are available only with respect to certain conditions. For an NRI to avail such benefits, the person's income cannot be earnings from investments. Also, It cannot be long-term capital gains. NRIs must earn from rent, dividends, salary, and so on.

4. Repatriate the interest on your deposit: The principal and interest amounts will be repatriated to the NRO savings account. You can repatriate the funds in your account. The limit is 1 million USD per financial year. To carry this out, you have to submit relevant documents. 

5. Avail DTAA benefit: The interest on NRO deposits is subject to Tax Deducted at Source (TDS). The tax rate depends on the total interest on NRO deposits. You can reduce this by availing Double Taxation Avoidance Agreement (DTAA) facility. You can apply for DTAA benefits by doing the following. You need to provide a self-declaration in the prescribed format. You also need to provide other documents such as your self-attested PAN card. You must provide form 10F and tax residency certificate of the current year.

6. Auto-renewal on maturity: NRO deposit accounts get automatically renewed on maturity. Thus, you continue earning interest on your money. You get this option when you open your account.

7. Avail overdraft on your deposit: You can avail an overdraft up to 90 per cent of your deposit. This is available at a nominal interest charged over the interest rate. You only need to create an overdraft account against your existing NRO deposit account. 

An NRO deposit is one of the best investment plans in India. Hence, make sure you convert your resident FDs into NRO deposits.

To convert resident FDs into NRO deposits, click here.