The urge to spend can be difficult to curb, especially if you are young. But you should curb it as it impacts your overall financial standing both in the present and future. Starting investments early can help control your spending habits. You can also build a significant financial corpus over time, which works wonders. A Recurring Deposit is an incredible investment option to explore if you want to start investing early and small.
A Recurring Account provides the freedom to choose a preferred investment amount, tenure, and frequency, letting you build a significant financial corpus systematically. Anyone can invest in an RD. If you are a non-resident Indian, you can invest in an RD. However, you cannot invest in a resident RD. You need to consider an NRI RD. Let us understand the concept better.
Types of NRI RDs
NRI RD is of two types: Non-Resident Ordinary and Non-Resident External RD. If you have income-generating investments and assets in India, you might want to secure them. Given this, you may consider opening a Bank Account. However, simply opening an NRI Bank Account may not increase your income. Consider investing in an NRO Recurring Account to secure and grow your Indian income.
If you wish to grow your foreign currency income in India, consider investing in an NRE RD. Note that the investment is maintained in INR, so your foreign currency deposits will be converted to INR upon deposit.
Investment amount and tenures
As mentioned, RD provides the freedom of the investment amount and tenure. The minimum investment amount differs for each bank, but it would be nominal. There is no maximum investment amount. So, choose any amount that fits your financial capacity. You can invest in an RD for any tenure between six months and 10 years. Typically, invest for a longer tenure to take advantage of the applicable Recurring Deposit interest rates.
Taxation policies
The interest earned from an investment in Recurring Account may or may not be taxable depending on the type of NRI RD you hold. The interest income from an NRO RD is taxable in India. The same interest income may also be taxable in your country of residence if they have not signed the Double Taxation Avoidance Agreement.
The interest income from an NRE RD is 100% tax-free in India. This lets you enjoy the interest earnings to the fullest without taxation eating into them.
Repatriation
You can repatriate funds only up to USD 1 million from your NRO RD Account. You enjoy free repatriation with the NRE RD Account, which ensures you can readily access money during emergencies. Consider your preference when selecting between an NRO and an NRE RD Account. Using Online Banking platforms, you can open and manage both accounts from your fingertips.