What Are FCNR Deposits

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FCNR Deposits

FCNR (B) stands for Foreign Currency Non-Resident (B) accounts.

An FCNR is a deposit not an account, though. FCNR deposits can be opened by NRIs/PIOs in their NRE accounts.

Why FCNR deposits?

Since the funds in FCNR deposits are maintained in a foreign currency, the proceeds of FCNR deposits are immune to exchange rate fluctuations. As rupee has taken a beating over the years , those investors who had parked their funds in rupee denominated NRE deposits may be disappointed to learn the actual FCY value of the maturity proceeds of these NRE Deposits. INR  has fallen from 46 in 2006 to 68 in 2016. Now, that is a significant loss for investors who had invested assuming they would repatriate the maturity proceeds (having made about 14% yield/annum). These investors won’t have a happy memory of investing in NRE deposits in India.

Rupee depreciation over the years
Rupee Depreciation over the years.

This is where FCNR deposits come to the rescue. It is a common knowledge that interest rates in US and other countries are abysmally low.

Therefore, FCNR scheme available with banks in India makse for a very attractive investment option.

Not only these deposits are secure but also completely  tax- free.

Which foreign currencies are available for booking these deposits?

FCNR deposits can be held in any permitted currency depedning on the availability of the same with respective banks:

Common currencies available with most banks are : USD , GBP , EUR , YEN , AUD and CAD.

How to open these deposits?

An FCNR deposit can be opened by:

  • Fund transfer from abroad via Wire/TT transfer
  • By depositing a foreign currency DD/Cheque.
  • By debiting funds from NRE Account
  • By depositing Foreign currency cash/travellers’ cheques
  • By transferring FCNR funds between banks

Term of FCNR deposits

FCNR deposits are available from 1 year to 5 years term.

There is no interest payout if you liquidate these deposits before completion of one year period.

There is no penalty on liquidation though.

Taxability of FCNR Deposits

Both FCNR and NRE deposits are tax free in India. This means there will be no tax on the interest earned on these deposits. However, you may have to pay taxes on the interest earned on these deposits abroad under you “Global Income”. Please check with you CPA or tax consultant for the same.

Other features of FCNR Deposits

  • FCNR deposits can be held jointly with other NRIs or with residents under FoS basis.
  • Loan / overdraft can be availed against these deposits.
  • You can also avail of an offshore loan against these deposits.
  • Principal and Interest are fully repatriable.

Hope you liked this article!

Let us know if you have any questions on these accounts.

Cheers!

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