Understanding FCNR Account: Features and Benefits

If you are a Non-Resident Indian (NRI), Overseas Citizen of India (OCI), or Person of Indian Origin (PIO), then you must be wondering how to manage your foreign income in India. The best option for you could be a fixed-term account, which can provide secure and predictable returns. You can open a Foreign Currency Non-Resident bank account in India to maintain your foreign income in the same currency. 

In this blog, we have provided the features and benefits of FCNR Accounts and how you can use them to maximise their benefits. You can also learn the difference between the three Non-Resident bank accounts, NRE, NRO, and FCNR accounts. 

What Is an FCNR (B) Account?

The full form of FCNR Account is Foreign Currency Non-Resident Account. It is used to deposit the funds in a foreign currency in India. This account helps NRIs secure funds from currency fluctuations. On this account, the funds and interest earned on the amount are both tax-free in India. Let the NRIs, PIOs, and Overseas Citizens of India (OCI) maintain a fixed deposit in India in convertible foreign currencies for a time ranging from 1 to 5 years. This account is managed in a foreign currency, which protects a person's funds from currency fluctuations during the deposit period. Additionally, like a Non-Resident External (NRE) account, the funds in the FCNR (B) account and the earned interest on that are tax-free in India. Apart from this, the denomination of this account in foreign currency offers the account holders the option to save their income abroad in a foreign currency, such as

• Euro (EUR)
• Australian Dollars (AUD)
• US Dollars (USD)
• Canadian Dollar (CAD)
• British Pound (GBP)
• Swedish Krona (SEK)
• Japanese Yen (JPY)
• Swiss Francs (CHF)
• Danish Krone (DKK)

An FCNR (B) account is the best investment option for NRIs, PIOs, and OCIs, which helps them retain their money in foreign currencies while offering good returns on their savings. Since the earnings from abroad will be in foreign currencies, it won't be impacted by the exchange rate fluctuations. Hence, ensuring returns that are risk-free. 

This was all about an FCNR (B) account. Moving ahead, let's know who is eligible to open this account. 

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Who Can Open an FCNR (B) Account?

Only NRIs, PIOs, and OCI cardholders are eligible to open an FCNR (B) account. Your NRI status should be according to the rules of the Foreign Exchange Management Act (FEMA). These are as follows:

1. You are living outside Indian except Bhutan or Nepal for more than six months in an accounting year, i.e., April to March.
2. With supported documents, you have stated your intention to live outside India for an uncertain period:
   • Seafarers who are employed on international ships
   • Planning to study abroad
   • Resident Indian professionals, before going overseas for employment

These are the people who are eligible to open an FCNR (B) account. Moving further, let's know what the features of this account are. 

Requirements for Opening an FCNR Account

First of all, you need to have an NRE account to place an FCNR deposit. Once you have your NRE account, you can open an FCNR account in an Indian or overseas bank branch. Here is the list of all required documents:

• Your valid passport
• Your valid visa/ a work permit
• Proof of current and permanent address
• Declaration of PIO status
• PAN card
• For an account of a seafarer, a copy of your valid passport, CDC, contract letter, and declaration letter

You need to satisfy one of the following conditions to open an FCNR account: 

• If the money is transferred in a foreign currency through various banking channels.
• If the money is transferred from your NRE account or any other type of FCNR account.
• If a cheque is drawn in favor of the bank in a foreign currency. 

Features of an FCNR (B) Account

Here are some of the top features of the FCNR account, making it one of the best options to maintain funds and invest in India:

Foreign Currency Denomination

The key feature that differentiates the FCNR account from a Non-Resident External (NRE) Account and Non-Resident Ordinary (NRO) account is its denomination in foreign currencies. It means that the balance of the account is maintained in the chosen foreign currency, saving account holders from the currency fluctuation impact.

Term Deposits

FCNR accounts are not savings but term deposit accounts. This allows account holders to earn interest on their fixed deposits with higher interest rates than on local fixed deposits. Also, the account provides NRIs the option to invest in foreign currency and earn good returns over a specific time. Apart from this, banks allow premature withdrawal, but interest is only paid after the completion of one year.

Repatriation

One of the significant benefits of having an FCNR (B) account is simplifying repatriation. With this account, you can easily repatriate both the principal amount and the earned interest back to your home country without any issues.

Interest Rates

The rate of interest on FCNR accounts is affected by the conditions of the global market and is typically higher than that provided in domestic deposits. This makes it an attractive investment option for people to increase returns on their foreign income.

These are the features of an FCNR (B) account. Apart from this, there are also several benefits to it. Want to know what they are? Read the next section and get your answers. 

Benefits of an FCNR (B) Account

Here are the following benefits of opening an FCNR (B) account in India:

Higher Returns

The higher interest rates on the FCNR accounts make them a good option for investment. Compared to what people might receive in their residing country, it provides them with better returns on foreign investment.

Tax Exemption

As mentioned above, the interest you earn on your FCNR (B) account deposits is tax-free in India. It means that you have your whole principal and interest amount on your side, which is in your account. 

Diversification

For people with income streams in several currencies, an FCNR account offers diversification. This can be specifically good for those people doing business or working in different countries. 

Risk Mitigation

By having a foreign currency account, NRIs, PIOs, and OCIs can protect themselves from the volatility of exchange rates. This decreases the risk of losing earnings value because of the depreciation of currency. 

Denominations

As mentioned above, an FCNR account is denominated in several currencies. So, as per your choice, you can save your overseas income in any foreign currency that you like. 

Also, this account can be held jointly by two or more persons. In addition, you can use this account as collateral security for loans. These are some of the benefits of having this account. Moving forward, let's know the documents required to open an FCNR account. 

Minimum Fund Deposit Required For FCNR Accounts

Here is the minimum amount, as per the currency, that is required to deposit if you want to open an FCNR account: 

Reasons To Open an FCNR Account

Here are different reasons why you should open an FCNR account: 

• You can repatriate the money in your FCNR accounts, and your full amount, including the principal amount and interest, can be repatriated as it is in foreign currency. You can easily transfer your funds to a foreign bank account and vice versa. 
• You can open an FCNR deposit account jointly with another NRI or a resident family member of India. Also, keep in mind that a joint account with a resident of India can only be operated on a "Former or Survivor" basis. 
• You can also apply for an overdraft facility available on your NRE deposits. It means you can get access to your funds in an emergency. 

Documents Required to Open an FCNR (B) Account

To place an FCNR deposit, first, you need to have an NRE account. Once you open this account, you can open an FCNR account in India or overseas. In addition, to open an FCNR (B), you need to provide the following documents:

• Valid passport
• Proof of current/ permanent address
• PAN card/ Form 60
• Valid work permit/ visa
• PIO status declaration
• In case of a seafarer's account, a photocopy of the passport and CDC, declaration letter, and contract letter
• Foreign Account Tax Compliance Act (FATCA) declaration as applicable for the United Kingdom (UK), the United States (US), Canada, or any other 100+ nations signed the CRS.

These are the documents generally needed to open an FCNR (B) account. Additionally, you can open the account with:

• A cheque in foreign currency drawn in the bank's favour
• Through your banking channels, transfer of money in foreign currency
• A transfer from your other FCNR account or NRE account

Difference Between FCNR, NRE, and NRO Accounts

Here are the differences between these Non-resident accounts: 

NRE Account

With the help of an NRE (Non-Resident External) account, you can deposit any of your foreign income into your Indian bank account. Your foreign income will be converted into Indian currency at the current exchange rates, and then it will be deposited. You cannot hold the funds in foreign currency with this account, which you can do with the FCNR accounts.  

NRO Account

With the help of an NRO (Non-Resident Ordinary) Account, you can deposit your money, which comes from Indian sources. This account is the best option for the NRIs who are still earning in India through rents, dividends, pensions, etc. Also, you can still deposit your foreign currency into this account, but it will be converted into INR at the current currency exchange rates. 

Takeaway

This was all about the Foreign Currency Non-Residential Bank Account. For people looking to safely keep their foreign earnings, an FCNR account stands out as a secure and beneficial option. Also, it is the right choice to make if you are looking for an option to save your earnings in foreign currencies. With this, being a PIO, NRI, or an OCI, if you are looking for a reliable visa and immigration service provider, contact Visament. With many years of experience, we are a team of experts who can help you in fulfilling your immigration needs. Do connect with us if you are looking for reliable assistance with your Indian passport, OCI card, or visa; surely you will not be disappointed.