FCNR Account: A Comprehensive Guide for NRIs

A Foreign Currency Non-Resident (FCNR) Account is for NRIs to transfer their foreign income to India. A major benefit of an FCNR Account is that you don’t need to convert your foreign income to INR. It ensures that NRIs can protect their funds against exchange rate risks. Dive deeper to learn more about FCNR Accounts.

Features of FCNR Accounts

Some features of the Foreign Currency Non-Resident Account are as follows:

Investors can open an FCNR Account as a fixed deposit in few permitted foreign currencies that can be easily converted to Indian rupees. The eligible currencies include the US Dollar, Canadian Dollar, Australian Dollar, Singapore Dollar and Great Britain Pound.
The FCNR Accounts can be opened for a duration of one year to five years. A premature withdrawal facility is available in FCNR Accounts. But the penalty for premature withdrawals is that investors get the rate applicable for the period for which the deposit was held with the Bank or contracted rate of the deposit, whichever is lower. Moreover, no interest is payable if the FCNR funds are liquidated before one year.
A loan facility is available against FCNR Accounts. But the loan amount can be used for personal or business purposes only. The borrowed amount cannot be used for onward lending or for purchasing agricultural lands. However, the loan amount can be used for purchasing a flat or house for individual residences in India.

Benefits of FCNR Accounts

Some of the major FCNR Account benefits are as follows:

Multiple Currencies: NRIs can open an FCNR Account in several freely convertible foreign currencies, including USD, GBP, and CAD.
High Liquidity: The principal as well as interest amount from FCNR Accounts are fully and freely repatriable.
Fixed Interest Rates: FCNR deposit interest rates don’t change during the tenure and gets compounded semi-annually.
Tax Exemptions: The interest generated from FCNR Accounts is exempted from income tax.
No Deposit Limits: FCNR Accounts come with no minimum or maximum deposit limits.
Flexible Tenure: Investors can pick a convenient tenure of one year to five years for FCNR Accounts. The interest rate is higher for a longer tenure.

Documents Required for Opening FCNR Account

The documents that you need to open FCNR Account are as follows:

Valid passport copy
Residency status proof (OCI/ PIO)
Proof of overseas address
Proof of Indian address (optional)
PAN card copy

FCNR Interest Rate and Exchange Rate

You will come across different FCNR deposit interest rates for different currencies. However, FCNR interest rates are higher than the individual’s country of residence.

FCNR Accounts are opened in foreign currency. Therefore, no risk is associated with the exchange rate of the deposited currency and the Indian Rupee. With no exchange rate risk, the interest rates go higher than what is offered in the home country. Therefore, these accounts offer a risk-free investment opportunity to NRIs.

The principal amount, as well as interest earned in FCNR Account, are totally repatriable. They can be freely remitted beyond the nation without any permits required from the Reserve Bank of India. Moreover, the earned interest can be transferred to the NRE or NRO Account of the investor.

FCNR Account Taxation

The interest earned on FCNR Account gets tax exemptions in India. However they might be taxable in the investor’s country of residence according to their residential status. Individuals who become a resident under FEMA can get tax exemptions on FCNR interest even after returning to India.

The tax exemption on the interest will be applicable until the FCNR Account reaches maturity. However you can enjoy tax exemptions on NRE accounts as long as you are a non-resident, as per FEMA. But once you become a resident of India, the interest earned on your NRE account becomes taxable.

Conclusion

Several NRIs are opening FCNR Accounts to avail tax deductions and competitive interest rates. The funds from an FCNR Account can be easily repatriated with no worries about conversion rates. Moreover, premature withdrawal is available from these accounts after certain charges are deducted.

FCNR FAQs:

Can I open an FCNR Account even when I am not in India?

You don’t need to be physically present in India to open an FCNR Account. NRIs can open these accounts in the overseas branch by submitting basic documents like proof of foreign address and a valid passport copy.

Why should I invest in an FCNR Account?

FCNR Accounts enable investors to avoid the risk of exchange rates. As a result, the value of the deposit does not reduce. So, investors can withdraw the same amount they deposited along with the accrued interest.

Is it possible to avail loan against the FCNR deposit?

The loan facility against FCNR deposits is quite convenient for investors. FCNR loans are available to individuals with varying repayment policies, according to the bank. Moreover, FCNR loans are available in Indian as well as foreign currencies.