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Can NRIs Invest in Corporate FD? A Complete Guide

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  • Can NRIs Invest in Corporate FD? A Complete Guide

In India, FDs are considered as of the most reliable and secure options when you are looking for stable and secure returns. But what about Non-Resident Indians (NRIs) who want to invest in India and create wealth through savings? Can NRIs invest in Corporate FD? The short answer is everybody in, but there are some stipulations and rules.

In this post, I guide you on everything that you wanted to know about NRI investing in Corporate Fixed Deposits – eligibility, process, risk, taxation, and alternatives.

What is a Corporate FD?

A Corporate Fixed Deposit (FD) is a deposit offered by the non-banking financial companies (NBFCs), housing finance companies, or corporates. It is unlike a bank FD, as a corporate FD would provide you higher interest rate and get you as a better investment option. They offer a fixed tenure and fixed interest payouts – monthly/quarterly/yearly.

Corporate FDs can be a great investment avenue for the NRIs, who wants to diversify their portfolio in India and earn predictable and steady returns.

Is NRI Allowed to Invest in Corporate FD in India?

Yes, NRIs, PIOs and OCIs can invest in certain Corporate FDs in India. But not all companies accept deposits from NRIs because of regulatory limitations and compliance norms. So it’s very important to verify with the company in question before investing.

Most of the prominent NBFC and companies that provide NRI Investment Services in India makes it unambiguous if their FD schemes are open for NRIs.

Benefits of Corporate FDs to NRIs

  • Better Interest Rates – The interest rates offered on corporate FDs are typically higher than those offered on bank FDs.
  • Regular Income – You can opt for a periodic interest payout for a regular cash flow.
  • Flexible Tenure – Between 1 to 5 years.
  • Diversification – Assists the NRIs to diversify not only in real estate or mutual funds, or NRE/NRO deposits.
  • Easy Process – There are several companies that provide a convenient application online for NRIs.
 

Risks Involved in NRI Corporate Fixed Deposit

Corporate FDs are tempting NRI investments but there are risks too:
  • Credit Risk – these FDs are not guaranteed by the RBI like the banks FDs. The issuant credit rating determines the default risk.
  • Liquidity Problems – You might not be able to take money out early, or you may be penalized for it.
  • Tax Considerations – Interest income is taxable in India as per the provisions of the Income Tax Act, 1961 and Tax is subject to Tax Deduction at Source (TDS).

It’s always good to look for only top-rated company FDs which are CRISIL, ICRA or CARE rated.

 

Catch the Full Experience – Watch the Video Now

 

How NRIs Can Invest In Corporate FD?

Here’s how NRIs can invest in the corporate FD:

  • Choose the Right Company – Search for companies that are offering NRI investment services in India and with greater safety ratings.
  • Choose between Deposit Type – Cumulative (interest paid at the end) or Non-Cumulative (interest paid regularly).
  • Submit your Documents – PAN card, passport, visa, foreign address proof that you are residing, and NRE/NRO account opening form.
  • Transfer of Fund – Investment must be submitted through NRE/NRO banking accounts in accordance with the instructions under FEMA.
  • Apply – There are a lot of NBFCs that accept online applications for NRIs.
 

Taxation on NRI Corporate FD

The interest received on corporate FD by NRIs is taxable in India. TDS is deducted at the rate of 30% (with applicable surcharge and cess). But NRIs can avail relief under the Double Taxation Avoidance Agreement (DTAA) if it exists between India and their host country.

If you are investing through an NRO account, then returns are taxable in India. If investment is done through an NRE account, tax implications are dependent upon the company’s FD policy and the RBI regulations.

Alternatives to Corporate FD for NRIs

Apart from corporate FDs, NRIs can explore other options under NRI investment services in India, such as:

FAQs – 

Q1: Is it possible to invest in a corporate FD in India for an NRI?

Yes, NRIs, PIOs and OCIs can invest in corporate fixed deposits provided the company accepts NRI applications and the application is made through NRE /NRO account.

Q2: Is it safe for NRIs to invest in corporate FDs?

Corporate FDs are riskier compared to bank FDs as they carry no insurance from the RBI. Safety is dependent on the company’s credit. Go in only for AAA-rated corporate FDs.

Q3: How is the interest on NRI corporate FD taxed?

Interest income is subject to tax in India, where it is 30% TDS. But NRIs can avail the benefit of relief under DTAA to prevent double taxation.

Q4: What is the minimum amount to invest in a corporate FD for NRIs?

While the minimum amount required varies from company to company, it usually is upwards of ₹10,000 – ₹25,000.

Q5: Is it possible for an NRI to break a corporate FD before maturity?

Pre-mature withdrawal can be discouraged or permitted after a minimum lock-in period, with penalty. Always check terms before investing.

Q6: Which is better for NRIs – Corporate FD or Bank FD

  • Corporate FD: High interest, medium risk, taxable returns.
  • Bank FD (NRE): Lower interest, tax-free, and safer.

Final Thoughts

Yes, NRIs can invest in corporate fixed deposits in India, although it is a tradeoff between a slightly higher return and a slightly higher risk than bank FDs. The trick lies in not just parking your funds in highly-rated companies that offer dependable NRI investment in India, but also ensuring that you pay heed to the tax, as well as credit, consequences of your investments.

If you are an NRI looking for fixed returns, corporate FDs can become a good addition to your portfolio— just do your homework before you invest.

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