NRIs have many investment options in India but FCNR is one of the most ignored ones… You can read all about FCNR & is it a good investment.
What is FCNR account?
FCNR account stands for Foreign Currency Non-Resident account. It can be opened only by NRIs. It is similar to a Fixed Deposit but it is a Fixed Deposit wherein money can be deposited in foreign currency and interest can be earned on the same.
Read – Best Investment Options for NRIs
What are the key features of FCNR deposit?
The key features of FCNR accounts –
- It is a fixed deposit account that can be opened by NRIs
- The account can be opened by depositing money in foreign currency. Major currencies such as Australian Dollar, Canadian Dollar, Japanese Yen, Euro, UK Pound and US Dollar are allowed. The currency depends on the bank with which the account is being opened.
- Usually the tenure of an FCNR account ranges from 1 year to 5 years.
- The account can be opened as a joint account with another NRI
- The interest rate is determined by the bank based on the ceiling determined by RBI.
- Usually the FCNR account holder can get a loan against this account subject to certain conditions. The loan can be taken for personal or business use.
- The NRI can avail of the nomination facility for this account. The nominee can be an NRI or a resident Indian.
- The FCNR account can be continued till its maturity date if the status of the account holder changes from NRI to Resident Indian.
Why should I have an FCNR account?
- An FCNR account is a useful account to invest money in as regular interest rate is paid.
- There is no currency fluctuation risk as the amount invested and amount paid back in terms of principal and interest are in the same designated foreign currency.
- The interest earned is not taxable in India.
- The amount in the FCNR account is freely repatriable. The amount can also be transferred to the nominee’s account without any charges or taxes in case of death of primary NRI account holder.
- If you are an NRI, you can invest your earnings which might be in foreign currency in an FCNR account without any exchange rate fees and also get back your investment along with interest without any exchange rate fees.
Check – Status for NRE FD after return to India
FCNR Interest Rate
Here are the interest rates on FCNR accounts of some banks for US Dollar Investments (w.e.f March, 2019)
| Bank | Currency | Tenure | Interest Rate |
| ICICI Bank | USD | >= 12 months < 24 months | 3.64% |
| ICICI Bank | GBP | >= 12 months < 24 months | 1.70% |
| Axis Bank | USD | > 12 months <18 months | 4.00% |
| Axis Bank | GBP | > 12 months <18 months | 1.35% |
| SBI (<USD 300000) | USD | >12 months< 24 months | 3.64% |
| SBI | GBP | >12 months< 24 months | 1.45% |
FCNR Vs NRE FD
Interest Rates in NRE FDs are always higher but there’s currency risk.
Read – Mutual Funds for NRIs in India
What are the tax implications of income earned in FCNR account?
- Interest income earned from FCNR account is tax-free in India.
- The amount that is transferred to Resident Foreign Currency account or Resident Rupee account after maturity is not taxable as well.
Are there any drawbacks of an FCNR account?
- It cannot be opened as a joint account with a resident Indian.
- Premature withdrawal is subject to penalty. It depends on the bank where the account is.
- The interest rate is usually lower than that of NRE/NRO deposit accounts.
How do I open an FCNR account?
You can contact the bank and you require documentation such as Passport, Visa, KYC, FACTA declaration and identity proof and address proof for current residence.
Is FCNR good Investment?
In the long term, you will see that FCNR & NRE FD returns will be more or less the same because interest differential will take care of Indian Rupee depreciation. You can consider FCNR for diversification… FCRN can also be considered after periods of significant appreciation of Indian Rupee in the short term.
This post is written by Vidya – she is an NRI
If you have any queries related to FCNR – please add in the comment section.
It’s not very easy to open FCNR account with few banks. The staff don’t know about this product. It’s a pity. They take long time & long procedure to open with few banks.
Hi Sartaj,
That’s true most bankers have no clue about NRI issues.
Can you tell us in which section of Income Tax law, it is mentioned that interest earned in FCNR account is tax free in India. Regarding NRE FD, it is there.
Hi Amiya Maji,
As per section 10(4) of the income tax act, interest earned on FCNR deposit is exempt from tax.
EUR FCNR interest is very low compare or even negligible to other currencies. Can i invest in USD from Europe, is any specific restrict in opening FCNR based on country you stay.
Hi Sara,
Yes, you can invest.
Besides FD deposit in FCNR is there any financial instrument risk free like( Gov. bonds which can be considered with interest rate higher then FD)
Hi Shankar,
Tax-free bonds are giving around 6% – available in the secondary market.
Fema says the NRI upon becoming resident,has to redesignate FCNR as RFC and the interest thereafter is tax free.
RBI says, one can hold on to FCNR till its first maturity, even after the NRI becomes ROR, but it does not match with FEMA.
IT Act says, for 2-3 yrs NRI can be RNOR after returning, and thereafter Interest on FCNR, if continued till first maturity or RFC, if redesignated, as per FEMA or RBI, is taxable. Which one is more authentic and transparent. RBI, FEMA, or IT
Hi Ramdas,
As per Section 10 (clause 4(ii)) of the Income Tax Act, NRE interest is exempt from tax only for those who qualify as NRI as per FEMA. Since, as per FEMA, you become resident from day 1 of permanent return, you cannot hold NRE deposits. Even if you do ( as you said that RBI allows so ) the interest on such NRE deposits is taxable.
Is FCNR deposit interest taxable in case of RNOR?
Hi Pandurang,
It’s tax-free.
On return to India, how long can i continue my FCNR deposit
Hi. Barun,
Please refer https://wisenri.com/nre-fd-after-return-to-india
Hi, Barun
FCNR deposit can be allowed to run up to maturity. But, you might get contracted rate of interest till maturity.
My wife returned to India in July19 after being NRI. my queries are :
1 ) When she become RNOR from NRI status ?? from July 19 itself or only after spending 181 days in India??
2) when she is obligated to convert her current NRE deposits / NRE account to RFC deposit or rupee a/c now itself or after spending 181 days in india??
4) Can she convert NRE deposits to RFC deposits after maturity which in some cases several years away.
3) underthese circumstances , since current NRE deposits can be continued till maturity what will be tax treatment for the interest earned either for NRE deposit or RFC deposit if we choose to convert so now itsef during RNOR or after that ( ROR ) ??
Please advise.
Hi,
Please refer https://wisenri.com/nre-fd-after-return-to-india