The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of January 15, 2024.
As a Non-Resident Indian (NRI)/Person of Indian Origin (PIO)/Overseas Citizen of India (OCI), you may wish to invest your overseas earnings in foreign currency in a fixed deposit account in India. For such term deposits, a Foreign Currency Non-Resident Bank (FCNR (B)) account is all you need. In this article, we will delve into the benefits, features and key considerations of FCNR (B) accounts.
What is an FCNR (B) account?
An FCNR (B) account lets you maintain a fixed deposit in India in freely convertible foreign currencies for a tenure ranging from one to five years. Since the account is maintained in foreign currency, it secures your funds against currency fluctuations during the tenure of the deposit. Like a Non-Resident External (NRE) bank account, the funds in this account and the interest earned are tax-free in India.
An FCNR (B) account lets you transfer funds from your NRE account or vice versa. You can also directly remit funds from your overseas bank account to open an FCNR (B) account in India. The funds will be converted to the desired foreign currency, at the prevailing exchange rates provided by your bank. Commonly used currencies are Australian Dollar (A$), British Pound (£), Canadian Dollar (C$), Euro (€), Japanese Yen (¥) and US Dollar ($). As per the prevailing Foreign Exchange Management Act (FEMA) regulations, banks are allowed to accept FCNR (B) deposits in any currency which is freely convertible. Please consult with your bank to know the permissible currencies for opening an FCNR (B) deposit.
There is no restriction on the amount of money that can be deposited in your FCNR (B) accounts. The principal amount in the term deposit and the interest earned are fully repatriable i.e., the funds can be transferred to an overseas account without any upper limits.
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Did you know?
In 1975, the Reserve Bank of India (RBI) introduced FCNR (A), which was discontinued and later replaced by the FCNR (B) account in 1993.
Funds that can be deposited into an FCNR (B) deposit
NRIs often have queries regarding the types of funds that can be deposited into an FCNR (B) account. Here is a quick list:
- Transfer from your overseas account or your existing NRE or FCNR (B) accounts;
- Interest accruing on the FCNR (B) deposit
Features of an FCNR (B) account at a glance
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Who can apply for an FCNR (B) account?
Only NRIs/PIOs/OCIs can open an FCNR (B) account. Under the prevailing FEMA regulations, you will be considered an NRI if:
Funds (both principal and interest) from this account are fully repatriable without any limits.
Interest earned in the account is exempt from income tax in India.
*Relative is defined under section 2 (77) of the Companies Act, 2013. This includes their parents (including stepparents), son (including stepson), son’s wife, daughter, daughter’s husband, siblings (including stepsiblings), and children
**The term ‘former’ or ‘survivor’ basis refers to the condition where only one of the two joint account holders that is the former account holder can primarily operate the account. The ‘Survivor’ can only operate the account after the ‘Former’ passes away.
***The list mentioned is indicative and are not exhaustive. These may differ from bank to bank. You may want to consult your bank for more details.
You can open an FCNR (B) account online using internet or mobile banking or by visiting your nearest branch.
Opening an FCNR (B) account as a non-resident offers you various advantages. You can open a fixed deposit in foreign currency and earn interest which is exempt from tax in India. You can also use your FCNR (B) account as collateral for loans.
Frequently Asked Questions
Can an NRI maintain all three: NRE, Non-Resident Ordinary (NRO), and FCNR (B) accounts simultaneously?
Yes, you can maintain all three types of accounts simultaneously. You can use a combination of these accounts to manage your finances, depending on the income sources and financial needs.
Is it possible to obtain a loan using my FCNR (B) deposits as collateral?
Yes, it is possible for you to obtain a loan or overdraft facility using your FCNR (B) account.It is important to note that even when FCNR (B) deposits are used as collateral, they continue to earn interest unless liquidated. However, repatriation of funds outside India from this loan is not allowed. In case there is a default on the loan availed against these deposits, the bank may liquidate your FCNR (B) deposit to recover the outstanding loan amount. It is advisable to have a comprehensive understanding of the terms, conditions, and interest rates. You may want to consult your bank for more details.
Can I transfer the funds in my FCNR (B) deposit to any third party?
Funds held in your FCNR (B) deposit can be transferred to any third party with an international bank account. In India, the funds held in your FCNR (B) account can only be transferred to your own NRE/NRO accounts.
What happens to my FCNR (B) account if I return to India and become a resident again?
If you return to India and your status changes from an NRI to a resident, you can continue to hold your FCNR (B) deposit till maturity at the contracted rate of interest. You also have the option to convert your FCNR (B) deposit account to a Resident Rupee Deposit account or a Resident Foreign Currency (RFC) account.
However, the interest earned on such FCNR (B) deposit accounts would be taxable once you become a resident as per the Indian income tax provisions.
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