Non-resident Indians living and working overseas can invest in a host of investment choices in India. This variety enables them to invest their hard-earned income in several options in hopes of earning reasonable returns. One such investment tool is a Foreign Currency Non-Resident or FCNR Account.
About FCNR Account
An FCNR Account refers to an NRI Fixed Deposit that enables NRIs to invest in India and hold their investments in a foreign currency permitted by your bank. Those with a valid Person of India Origin or Overseas Citizen of India card can also open an FCNR Deposit.
History
You might have heard the terms FCNR (A) and FCNR (B) Accounts. The erstwhile FCNR (A) Account, introduced in 1975 to encourage NRIs to invest in deposits, no longer exists in India. Instead, the Reserve Bank of India replaced it with the FCNR (B) Deposit Account in 1993.
Benefits
Some essential benefits of opening an FCNR Deposit Account include the following:
Foreign currencies
NRIs can open an FCNR Account to deposit the foreign currencies permitted by their designed banks. Hence, it is an excellent investment tool for investors who want to retain their investment in a foreign currency while earning good returns. In addition, since the deposit holds the principal sum and interest in a foreign denomination, your investment is free from risks associated with interest rate fluctuations.
Most banks let you deposit in popular currencies like the US Dollar, Australian Dollar, Hong Kong Dollar, etc. However, it is advisable to check the currencies permitted by your bank before investing.
No deposit limit
No minimum or maximum limits exist on the amount you can deposit in this NRI FD.
Repatriation
The principal amount and interest earned in an FCNR Account are freely and fully repatriable to the country where the NRI lives.
Fixed interest rates
The FCNR Deposit rates may vary across banks. Hence, it is crucial to enquire about them before investing. However, once you begin your investment, the interest rate remains fixed throughout the tenure of your deposit, and banks typically compound the interest on a half-yearly basis.
Flexible tenure
When opening an FCNR Deposit, you can choose from tenures that range from one to five years, based on your financial goals.
Open jointly
You can open this NRI FD independently or jointly with two or more NRIs. This deposit also gives you the advantage of adding a nominee to your account.
Tax benefits
A Non-Resident External or NRE Deposit is an NRI FD that enables you to earn interest at a competitive rate on your foreign currency earnings. In addition, the interest you earn on the deposit is tax-free in India. Similarly, the principal sum you invest in an FCNR Deposit and the interest earned from taxation in India.
