What is an FCNR Account?
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Key Takeaways: What are the benefits of an FCNR account for an NRI? What are its features? This article explores an important investment avenue for all Non-Resident Indians.
FCNR account stands for Foreign Currency Non-Resident Bank (B) account. An FCNR account allows NRIs to invest foreign currency in term deposits in India and earn tax-free interest.
This is great for NRIs who live in countries where interest rates are low such as US, UK, Canada, Australia, etc. They can benefit from higher interest rates in India while holding their deposits in a foreign currency, thus protecting them against exchange rate fluctuations.
Features of FCNR accounts
- Foreign currency denomination: It is a foreign currency-denominated account. This feature means that the money will not be converted to rupee denomination and will continue to be maintained in the NRI's preferred choice of currency amongst those approved by RBI.
- Term deposit account: It is not a savings but a term deposit account. It has a minimum tenure of one year and a maximum of five years. If the NRI's residential status changes during this period, they can continue holding their FCNR accounts until maturity at the rate of interest agreed upon initially. NRI's can also choose to compound the interest on a half-yearly basis payable at the end of one year. However, NRI's will not receive any interest in case of premature withdrawal within one year of deposit.
- Non-taxable: Interest income on these accounts is not subject to taxation as per Indian laws.
- Free repatriation: You can freely repatriate both the interest and the principal income abroad.
- Eligibility for loans: FCNR deposits make you eligible for loans in INR. These loans can be repaid from the maturity proceeds.
- Account-holders: You can open an FCNR account with two or more joint NRI account holders.
Currencies permitted under the FCNR scheme
RBI permits the following currencies for FCNR accounts*
- Pound Sterling
- Japanese Yen
- Canadian Dollar
- Australian Dollar
- Swiss Franc
- Singapore Dollar
- Danish Krone
- Hong Kong Dollar and others
We recommend that you check with your bank if you can book a new FCNR deposit in your preferred choice of currency.
Apart from the basic eligibility of being an NRI or Person of Indian Origin (PIO), you need to furnish the following documents to open an FCNR account -
- A valid passport and a recent passport size colour photograph
- Address proof in India (optional)
- Address proof in your country of residence
- A copy of your Indian PAN card or Form 60
- Proof of NRI status – Employment / Residence Visa or Work/ Residence permit
- Valid PIO/OCI card or any other proof of PIO status and signed in and filled in PIO declaration for PIOs
- Additionally, for NRI seafarers - Current work contract and copy of CDC along with the disembarkation stamp on the last page & FEMA declaration
Final Note: An FCNR account allows you to deposit overseas currency, which removes any risk of foreign exchange rate fluctuations. You can repatriate funds to your current country of residence once the deposit matures. You can even take a loan against your FCNR account balance. As such, an FCNR account is a safe investment option.
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*The information is updated as of November 2020.