Foreign Currency Non Resident Account (FCNR)

Introduction

Foreign Currency Non-Resident account (FCNR) is a type of bank account opened by Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to deposit their foreign earnings in a foreign currency. 

FCNR accounts are a popular investment option among NRIs who want to repatriate their savings later, as they can be freely repatriated in the same currency as the deposit. [1] A report found around 60% of NRIs preferred to invest in fixed deposits through FCNR accounts.

This blog explores what the FCNR meaning is, the FCNR account's full form, what is FCNR, and other details.
 

What is FCNR, and What does FCNR Mean?

FCNR accounts are operated in foreign currencies such as US dollars, British pounds, Euros, etc. and benefit from earning interest on the deposited amount. The interest earned on FCNR accounts is tax-free in India but might be taxable in the country of residence.

Previously, there were two FCNR accounts.

●    FCNR (A): 

FCNR (A) stands for Foreign Currency Non-Resident (Account) - (A). However, FCNR (A) accounts were discontinued by the Reserve Bank of India (RBI) in 2013 and can no longer be opened.

●    FCNR (B): 

FCNR (B) stands for Foreign Currency Non-Resident (Bank) account. There are two main types of FCNR (B) accounts that NRIs can open.

○    FCNR (B) - Fixed Deposit Account: This type of FCNR account allows NRIs to deposit their foreign currency savings in a fixed deposit for a specific tenure ranging from 1 year to 5 years.
○    FCNR (B) - Current Account: This type of FCNR account is similar to a regular current account allowing NRIs to make deposits and withdrawals per their requirements. 

FCNR (A) accounts were similar to FCNR (B) accounts, with the main difference being that they allowed NRIs to hold deposits in any freely convertible foreign currency, whereas FCNR (B) accounts only allow deposits in certain specified currencies. The interest rates for FCNR (A) accounts were also market-linked, unlike the fixed rates offered on FCNR (B) accounts.

Features of the FCNR Account

The key features of the FCNR account are as follows.

●    Save your deposit in any of the six foreign currencies: US Dollars, Pounds Sterling, Euro, Japanese Yen, Australian Dollars, and Canadian Dollars
●    Repatriate principal and interest amount fully
●    Enjoy tax waiver on the entire deposit
●    Open the deposit jointly with other NRIs
●    Transfer money to the FCNR account in several ways, such as online transfer, wire transfer, foreign currency cheque and foreign currency draft
●    Avail the overdraft on your NRO savings/current account against your FCNR Fixed Deposit
●    Avail of the nomination facility
●    Maintain the deposit for a minimum of one year and a maximum of five years
 

Eligibility Criteria for FCNR Account

The eligibility criteria for opening an FCNR account are that the holder must be a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO). One can only operate the account in foreign currencies.

Documents Required to Open an FCNR Account

To open an FCNR account, the following documents are generally required.

●    The account holder must provide a valid passport as proof of identity
●    The account holder must provide proof of address, such as a utility bill or driving license, in their country
●    The account holder needs to provide proof of their NRI or PIO status by submitting a copy of the visa, work permit, or OCI/PIO card.
●    This includes submitting the duly filled KYC form and the required documents, which include an Aadhaar card, PAN card etc.
●    In a foreign bank account remittance, the account holder must provide the FIRC as proof of the transaction.
 

Benefits of an FCNR Deposit

FCNR accounts are a safe and tax-efficient investment option for NRIs and PIOs to invest their foreign earnings in India. With the flexibility of choosing currency, tenure, and tax benefits, FCNR accounts are popular among investors.

Here are some benefits of an FCNR deposit.

●    Protection from currency fluctuations: FCNR deposits protect the account holder from currency fluctuations as the deposit and interest earned are both in foreign currency.
●    High-interest rates: FCNR deposits offer higher interest rates than domestic fixed deposits.
●    Tax benefits: Interest earned on the FCNR account is exempt from tax in India. This means the account holder does not have to pay tax on the interest earned.
●    Repatriation: FCNR deposits can be fully repatriated, and one can earn interest without restrictions.
●    Safe investment: FCNR deposits are considered a safe investment option as the principal and interest earned are both in foreign currency, protecting against currency risks.