Should you move dollars to an NRE FD?
Compare NRE fixed deposit returns against a US Treasury bill, net of tax and forex markup. See the exact USD/INR breakeven before the rupee erodes your gain.
How this works
NRE path: USD is converted to INR at entry (with optional forex markup), the INR compounds at the NRE FD rate (tax-free in India), then converts back to USD at maturity.
T-Bill path: USD stays in USD, compounds at the T-Bill rate, then US federal tax on interest is subtracted.
Breakeven USD/INR is the maturity rate at which both paths return the same USD. If the rupee weakens beyond this level during the tenure, the T-Bill would have been the better choice. Formula: breakeven = INR_at_maturity / (USD_net_tbill × (1 + markup)).
Sources & References
Frequently Asked Questions
- Why is NRE FD interest tax-free?
- Section 10(4)(ii) of the Income Tax Act exempts NRE account interest from Indian tax. It's a deliberate incentive to attract foreign-currency inflows.
- What if the rupee weakens?
- The calculator shows the breakeven USD/INR. If the rupee weakens beyond that level by maturity, T-Bill would have been better. Forward contracts can hedge, but they usually need a larger ticket.
- What are forex markup charges?
- Banks add a spread on top of the reference rate. Typical retail markup is 0.25-1% each way. Larger NRI deposits sometimes get zero-markup promotions.
- What is the DTAA position for US NRIs?
- NRE interest is zero tax in India (domestic exemption). India-US DTAA Article 11 gives India source-country rights, but India has waived them for NRE. US residents still report under FATCA; consult a CPA.
- Is NRE FD safer than T-Bill?
- Both are sovereign-backed — India (BBB-) for an NRE bank deposit, US Treasury (AA+) for a T-Bill. The T-Bill has zero credit risk; the NRE FD has the bank's credit standing plus India's sovereign envelope.
- Can I break the NRE FD early?
- Yes, but banks charge a penalty (usually the booked rate minus 1%). The calculator assumes you hold to maturity.
- What about FCNR deposits?
- FCNR keeps funds in USD (no forex risk) at lower interest (3-4%). If you're worried about rupee weakness but want an Indian-bank deposit, FCNR is the product to compare against — different from this calculator's setup.