What is FCNR Account? Fixed Deposits for NRI’s in India
What is FCNR Account?
FCNR Account stands for Foreign Currency Non Resident Bank Account wherein a NonResident Individual of Indian Nationality or Indian Origin can maintain a Fixed Deposit in Foreign Currency and earn regular interest on the same. The following foreign currencies are permissible:
2. British Pound
4. Japanese Yen
5. Australian Dollar
6. Canadian Dollar
As the NRI can maintain his account in the foreign currency, the risk for fluctuations in Currency Conversion is eliminated and the investor can earn a fixed rate of interest on his FCNR deposits which is usually more than the country in which the NRI is residing.
Features of FCNR Account
FCNR Account can be opened only by NRI’s or by Person of Indian Origin (PIO)
FCNR Account can be opened only in the Foreign Currencies specified above and thus the currency
fluctuation risk is eliminated
Regular interest is paid on the FCNR Account
Deposits with a maturity of more than 1 year and less than 5 years can only be opened
FCNR account can be opened jointly with other NRI’s as well as with Resident Indians
Nomination Facility is available and any NRI/PIO/Indian Resident can be made a nominee
Conversion to another designated currency is permitted at a cost to the account holder.
Recurring Deposits are not accepted under this scheme
Loan Facility against FCNR Account can also be availed of. However, the Loans cannot be used for the
purpose of relending,
carrying on agricultural/plantation activities or for investment in Real Estate
A major advantage of FCNR Account is that the Interest earned on these deposits is not taxable in India and nor
is the principal deposited in these accounts taxable under the Wealth Tax.
Documents required for opening FCNR Account
Completed application form signed and attested by your Banker/Embassy of India/Public Notary must be
submitted to the bank where the account is being opened accompanied with the following documents: –
1. Copy of passport
2. Copy of visa
3. Latest overseas bank statement in original, latest overseas telephone/electricity bill as original
Premature withdrawal of Fixed Deposits from FCNR Account
RBI has extended the facility of premature withdrawal from FCNR Account for the NRI’s/PIO’s and a penal
interest is levied on the same. The Penal Interest charged is different by different banks and is usually 1%.
However, if the deposit is closed before the maturity for the purpose of renewal, to avail the benefit of an
increase in the Interest Rates, for a period more than the unexpired period and renewed under the same scheme
and in the same currency, no penal interest is payable
Manner of Payment of Interest on FCNR Account
1. The Interest on the FCNR Account is payable on the basis of 360 days to an year as per the guidelines
laid out by RBI
2. The Interest on FCNR Account should be calculated and paid in the manner indicated below:For
deposits up to one year, at the applicable rate without any compounding effect
In respect of deposits for more than 1 year, at intervals of 180 days each and thereafter for the
remaining actual number of days. However, the depositor will have the option to receive the
interest on maturity with the compounding effect
FCNR Account after change in Residential Status
NRI deposits such as the FCNR can continue till the maturity date at the contracted rate of interest even after the account holder’s resident status changes to resident Indian.
On maturity, these accounts are converted to either an RFC account or the Resident Rupee Deposit
Other Investment Opportunities for NRI’s
Apart from investing in fixed deposits via FCNR Account, NRI’s have now also started investing in Real Estate and Stock Markets. With the introduction of automatic route, no RBI permission is required to be taken by NRI’s as a result of which many NRI’s are now investing in Indian Real Estate and Indian Stock Markets.
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