For NRIs: calculate your fixed deposit maturity value and see the tax treatment difference between NRE and NRO accounts.
NRE accounts hold your foreign income converted to rupees — both principal and interest are fully repatriable abroad, and interest is completely tax-free in India. NRO accounts hold income earned within India (rent, dividends, pension) — principal repatriation is capped (currently USD 1 million per financial year, subject to conditions), and interest is taxable with 30% TDS deducted at source (reducible under a DTAA with your resident country, if applicable, by submitting a Tax Residency Certificate).
An NRE (Non-Resident External) FD holds foreign earnings converted to INR, and both principal and interest are fully repatriable with tax-free interest in India. An NRO (Non-Resident Ordinary) FD holds income earned within India (like rent), is also repatriable up to limits, but interest is taxable in India with TDS deducted.
Yes, interest earned on NRE fixed deposits is exempt from income tax in India under Section 10(4). However, it may still be taxable in your country of residence depending on that country's tax rules.
NRO FD interest is subject to TDS at 30% (plus applicable surcharge and cess) under Section 195, unless reduced by a Double Taxation Avoidance Agreement (DTAA) between India and your country of residence, for which you'd need to submit a Tax Residency Certificate.