What is FCNR Deposit? How can NRIs Transfer Overseas Income?

An FCNR term deposit is an excellent choice for NRIs wanting to invest their hard-earned overseas income in the homeland. Read on to find out how.

If you’re a Non-Resident Indian (NRI) investor who’s looking to earn decent, risk-free returns on your overseas income, then an FCNR (Foreign Currency Non-Resident) account is for you. It is a good investment option for foreign currency that provides competitive interest rates without the risk of forex rate fluctuations. Here’s all the information about FCNR bank accounts.

What is an FCNR Account?

An FCNR is a term deposit account that can be maintained only by NRIs or a Person of Indian Origin (PIO) in foreign currency. The account can be opened in any authorised Indian bank or its branch by depositing foreign currency that is freely convertible. Since there is no hassle of conversion, the FCNR term deposit is safe from foreign exchange risk.

Key Features of an FCNR Bank Account: 

  • It is a foreign currency-dominated account that only offers term deposit schemes.
  • The FCNR account can be opened in any of the 9 designated currencies permissible by the Reserve Bank of India (RBI). These include USD, Euro, Pounds, Yen, AUD, SGD, CAD HKD, etc.
  • Tenure of the term deposit typically ranges between 1-5 years. Premature withdrawal is allowed, but interest is payable only on the completion of 1 year.
  • The interest in FCNR is compounded half-yearly. The rate of interest can vary from bank to bank based on the currency and tenure of the deposit.
  • The interest accrued on the FCNR term deposit is not taxable in India. However, it might be subject to tax in the resident country.
  • The principal amount plus interest earned on the FCNR fixed deposit account is fully repatriable.
  • Loans can be obtained against FCNR term deposits in both Indian rupees and overseas currency.
  • The account can be opened jointly with resident Indian (close relative) or another NRI.
  • The account holder can appoint an NRI or a resident Indian as a nominee.
  • If the residence status of NRI changes during the tenure of the deposit, the account can be held till maturity.
  • The facility of automatic renewal of deposit on maturity can be availed.

Ways to Transfer Funds to FCNR Bank Accounts:

The funds in an FCNR bank account must be remitted in a foreign denomination. There are several ways in which you can transfer money.

  • Funds can be dispatched directly from an overseas bank account either through wire/telegraphic transfer, Demand Draft, or internet banking.
  • If you are transferring funds from the NRE account into the FCNR account, the amount will be converted into foreign currency based on the current exchange rate.
  • Sending from any third-party account is not permissible.

Final Thoughts

Simply put, an FCNR deposit is an excellent investment mode for NRIs to earn attractive returns on their foreign currency without worrying about tax liabilities or conversion rates.