NRI : 14% tax-free return on fixed deposits

A leading Indian bank is offering non-resident Indians (NRIs) guaranteed returns of 13 to 14 per cent on fixed deposits.

In an email sent to NRI customers, HDFC Bank said: “Depending on the forex market scenario, there could be an opportunity for you to earn better return than NRE fixed deposit rates. You can do so by booking a foreign currency non-resident (FCNR) deposit and sell its maturity proceeds through a forward contract.

“The result of this is that you earn FCNR deposit rate and forward premium which can be better than NRE fixed deposit rate. This opportunity to earn better return may not be available at all times.”

The product works on the arbitrage that is currently available between the non-resident external and FCNR deposit rates, with the bank highlighting that there was an opportunity to earn 13 to 14 per cent tax free, guaranteed returns for NRIs.

For example, if you book a non-resident external (NRE) deposit for five-year duration @8.75 per cent, the deposit will earn a yield of 10.83 per cent pa (the rate/return will change depending upon the prevailing rates) under compounding option. However, if you were to book a Rupee Max deposit for 5-year duration, the return on your deposit can be significantly better, which is @10.25 per cent the yield comes to 13.5 per cent. On depositing Rs10 million, the depositor gets an extra nearly Rs1.3 million.

Although the minimum ticket size stands at Rs2.5 million, tenures vary between 12 and 60 months.