How NRIs should use FD calculator in 2022

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Whether the market is performing well or entering a bearish phase, and whether the economy is on an upswing or is inching towards recession, there is one investment option that never goes out of favour. And that is the humble fixed deposit (FD).

For generations now, fixed deposits have always been a part of most investors' portfolios. FDs help conservative investors preserve their capital and also earn interest in the process. And they help the risk takers reduce their overall risk exposure.

Today, even non-resident Indians (NRIs) can invest in FDs from abroad. This is because banks and non-banking financial institutions (NBFCs) offer special kinds of fixed deposits for NRIs. If you are an NRI looking to open an FD in India, you need to first get a better idea of how much your capital will grow if invested in an FD.

Here is where an FD calculator can help. Wondering what it is and how you can make use of it? This guide will give you a better idea of all the details. Let's begin at the basics.

How does a fixed deposit work?

A fixed deposit is a kind of investment where you deposit a lump sum amount with a bank of a non-banking financial institution (NBFC). This deposit is made for a specified period, known as the investment tenure.

Over the course of the investment tenure, you earn interest on your capital at a predetermined rate. This interest can either be paid out to you on a regular basis, or it can be reinvested into the FD again. In case you choose to reinvest your FD interest, you get the benefit of compounding, since your interest will earn more interest. And at the end of the FD tenure, you will receive the principal as well as the accumulated interest.

What are fixed deposits for NRIs?

Banks and financial institutions also offer fixed deposits for NRIs. These investment schemes are exclusively for non-resident Indians. They work just like regular fixed deposits. As an NRI investor, you can invest a lump sum amount in an NRI FD of your choice. Your capital will then earn interest at the specified rate.

There are two main types of fixed deposits for non-resident Indians, as explained below –

  • NRE fixed deposits

    NRE deposits or non-resident external deposits can be used to park the funds that you earn outside India. These deposits are foreign currency accounts, and you can repatriate the funds from these FD accounts freely. Here are the top features of NRE FDs.

    • It is a fixed deposit for your foreign currency earnings.
    • The interest earned on NRE FDs is not taxable in India.
    • Banks typically offer loan facilities up to 90% of the FD amount.
  • NRO fixed deposits

    NRO or non-resident ordinary FD is a regular fixed deposit account for NRIs. You can deposit the funds that you earn in India in these FDs. If you have any source of income in India, like rental income or earnings from a different investment account, you can redirect these funds to an NRO FD. Here are the top features of these FDs.

    • NRO fixed deposits are essentially rupee accounts.
    • The interest you earn on these FDs is taxable in India.
    • You can avail loans up to 90% of your NRO fixed deposit amount.

    No matter what kind of an FD you choose, it is essential to know how much your investment is likely to grow over the investment tenure. Calculating this manually can be tedious. Here is where an FD calculator can help.

What is an FD calculator?

An FD calculator is an online financial tool that shows you the total interest you will earn from your FD investment, at a specific interest rate and a given FD tenure. This online tool is free to use, meaning that you can use it as many times as you want, free of charge.

If you are a non-resident Indian who is planning to start a non-resident external FD or a non-resident ordinary FD, you can use an FD calculator to plan your investment better.

How to use an FD calculator?

Using an online FD calculator is fairly simple. All you need to do is follow the steps outlined below.

Step 1: Search for an FD calculator online.
Step 2: Enter the amount you wish to invest in the FD.
Step 3: Enter the tenure for which you wish to invest your funds.
Step 4: Fill in the rate of interest on your FD.

That's it. Once you enter these values, the online FD calculator will show you the total interest that you will earn from your deposit over the investment tenure. You can also see what the total corpus value at the end of the tenure will be.

What are the benefits of using an FD calculator?

There are many reasons to quickly run the numbers through an FD calculator before you make your investment in an NRE FD or an NRO FD. Here are the top benefits of doing this.

  • Error-free computation:
    You can manually compute the interest you will earn on your FD. But this is both cumbersome and prone to human error. With an FD calculator, you can get accurate numbers that make investment planning easier.
  • Easy comparison of FDs:
    Different FDs come with different interest rates. You can use an FD calculator to compare how different rates will affect your corpus. You can even use this online tool multiple times to compare offers from different banks and NBFCs.
  • Cost-free financial planning:
    An FD calculator is available for use free of charge. So, you can run multiple iterations to see how changing the FD amount, interest rate and tenure will impact your corpus. This allows you to carry on with your financial planning without spending a penny.

Conclusion

This sums up the details of using a fixed deposit calculator. If you are a non-resident Indian keen on starting an FD in India, compare the rates of interest offered by different banks and NBFCs in the country. That way, you can maximise your returns and earn higher interest.

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1 Provided all due premiums are paid.
ABSLI Fixed Maturity Plan is a Non- Linked Non- Participating Individual Savings Life Insurance Plan (UIN: 109N135V01)
ADV/7/22-23/690

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