What Is an FCNR account

What Is an FCNR account?

Overseas job opportunities and assignments have led many Indians to relocate abroad. For such Non-Resident Indians (NRIs), the question of how to manage their hard-earned foreign currency becomes paramount. Enter the Foreign Currency Non-Resident Accounts or FCNR accounts. These unique accounts can help NRIs save money earned overseas in foreign currency.

Although several banks offer FCNR accounts, banks mostly book FCNR deposits in select currencies such as US Dollars, Pounds Sterling, Euros, Japanese Yen, Australian Dollars, and Singapore Dollars. A prime example is the IDFC FIRST Bank's FCNR Deposit account. It allows NRIs to invest their overseas earnings efficiently and earn tax-exempt interest. For an NRI, an FCNR account is the best way to save in foreign currency.

What is an FCNR deposit, and what are its features?
 

At its core, an FCNR deposit is an investment option designed specifically for NRIs. It enables them to retain their money in foreign currency and, at the same time, earn commendable returns. Here are some of its key features, illuminated using the offerings from IDFC FIRST Bank:

1. Premature withdrawal is allowed, but the interest is paid after a year: Like many banks, IDFC IDFC FIRST Bank allows premature withdrawals from FCNR accounts. However, the bank pays the interest on these deposits only after the account has completed one year. This is a standard practice across banks to ensure that the funds remain with them for a substantial period.

2. NRIs can transfer money to open an FCNR account: FCNR accounts provide ease of transition for NRIs. For example, if you have an existing NRE account with IDFC FIRST Bank or any other bank, you can smoothly transfer funds from your NRE account to open or maintain your FCNR account.

3. The principal and interest you earn on your FCNR deposits are tax-exempt: One of the main attractions of the FCNR account, especially as provided by IDFC FIRST Bank, is the tax exemption on interest earnings. This means that the interest accrued or received on these deposits is exempt from Indian income tax.

4. Funds are freely and fully repatriable: This feature provides immense flexibility to NRIs. Whatever principal amount you deposit in your FCNR account, with the interest it earns, can be transferred back to your country of residence without any restrictions.

Differences between FCNR accounts and NRE accounts
 

Learn more about the key differences between FCNR accounts and NRE accounts here:

1. Currency: While banks maintain FCNR accounts in foreign currency, NRE accounts are essentially rupee-denominated accounts. Therefore, the money in NRE accounts is converted and held in INR.

2. Repatriability: Both accounts offer full repatriability, but the key difference is in the currency form. While the FCNR allows for repatriation in the same foreign currency, NRE accounts would repatriate the amount in INR.

3. Account type: FCNR accounts are strictly term deposit accounts, while NRE accounts can be savings, current, recurring, or fixed deposit accounts.

4. Taxation: The interest earned on both FCNR and NRE accounts is tax-exempt in India. However, tax implications might vary in the NRI's country of residence.

For NRIs, financial planning and management become a little more nuanced given the multiple jurisdictions and regulations at play. Choosing between instruments like FCNR and NRE accounts is pivotal. The FCNR account, with its features of retaining money in foreign currency, tax benefits, and repatriability, becomes a compelling choice. However, as with any financial decision, it's vital for NRIs to evaluate their financial goals, tenure, and other personal factors before deciding on the best savings mechanism.





Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.