Fixed deposits in india for US citizens

Hello,

This is my first post on indusladies even though i have been watching and reading many posts here. Now I have a question to post here. I am seeking expert's advice on how shall I proceed on this.

I am living here in U.S.A and my daughters are U. S citizens. I have a plan to move to india permanents after 5-6 years. We have been thinking to make some fixed deposits on my daughters name for 5-10 yrs time periods. Basically we want that money to be used for their higher education and other expenses like marriage. We are ready to deposit Rs 5 Lakhs for each one.

Does any one of the indian banks allow to make a FD on U.S citizens name? Please tell me are there any other investments. We wanted to take 0% risk in this investment. Also we wanted to know the banks which offer best interest rates for FD.

Thanks in advance for all your inputs.

Cheers!
Shainy

Shainy,
I am a US citizen living in India. I do have FDs in Indian banks. If you open NRI accounts, your bank will give you the option of putting funds in FDs. Interest rates are different for Resident Indians and NRIs. I do qualify as a resident Indian now(although I'm a USC, I have established residency in India).
Interest may vary slightly from bank to bank but it is easier to start FDs with banks you already have accounts with. Otherwise you have to go though the entire account opening process.
Btw, are you sure you want the FDs in your daughter's names? I do have funds set aside for my LO but all the FD's etc are in mine or DHs name. My financial planner was of the opinion that it is easier to have funds in our names so that moving it out and re-investing becomes easier. Also if your USC daughters turn 18 they need to start filing taxes in the US for any interest the FDs fetch in India. I'm filing taxes in two countries right now and can tell you it's not too much fun! I'm not sure of the taxation laws are different for inherited funds but I think interest is taxable in the US.

Laks09,

Thanks for your reply. I talked to some of my friends in indian who work in the banks. According to them, we came to concluson that it's better to have FDs on my name and DH's name. My friends also expressed the same opinion as you that reinvesting is easy if we have FDs on our names.

Thanks again for your response.
--Shainy

The laws are different for NRI US citizen and resident of India non-NRI US citizen not married to an Indian. To date after lot of research I am still unclear about the question of repatriation of money from Indian accounts/fixed deposits.

tashidelek2002 - There is only one way to repatriate funds back to the US. That is by going to your bank in India, getting a foreign currency demand draft(or foreign currency) and then taking it with you to the US and depositing it in the US. As of today up to $100K per year can be repatriated per year without RBI permission(not sure when that will change). Repatriating funds back to the US is difficult because of an RBI does not recognize Indian currency outside India and that would make depositing an Indian currency check in the US impossible.
Btw, this is whatI found out from my planner and maybe wrong. Better to check with an expert

Laks:
Thanks for the info....I have been trying to find out the real answer to this for a long time and everyone seems to have a different take on it. I have consulted a friend of mine who is a lawyer in Kerala and even he was not clear on this. Since you have gone back to India from USA, I suspect you are cognizant of the dismal outlook of the value of the US dollar in the future.

tashidelek2002 - I'm still not sure of the dollar dropping below repair levels. I still maintain my portfolio balanced between both countries. I'm still not sure of the rupee having being decoupled from the dollar completely. I still think if the US economy tanks it will impact the Indian economy and the rupee, although the way Re has been appreciating and holding strong against a weakening $ I feel the impact may not be too high, but then it's just my feeling. I tried look at analyst predictions, blah blah and nothing helps. Each one has a different opinion. IMO, I'm keeping my portfolio divided as of now(maybe a 40/60 split). That;s how I found out how to repatriate funds. Since we have relocated our portfolio may get tilted and off balanced and I wanted to balance it out.