As an NRI, the thought of investing in your homeland can be overwhelming, given the wide range of options available. Hence, the best way to choose an investment instrument is to be clear about your investment objectives and aspirations. One viable option that allows you to save your funds in foreign currency is the FCNR fixed deposit account. Read on to find out if an FCNR deposit for NRIsis suitable for you.
What is FCNR?
FCNR stands for Foreign Currency Non-Resident account and is a fixed deposit account that caters to NRE/NRO account holders. The interest rate offered on an FCNR account depends upon the bank and the type of currency you have deposited. For instance, IndusInd Bank’s FCNR account accepts the following currencies:
- US Dollars
- Japanese Yen
- Euro
- Pound Sterling
- Canadian Dollars
- Australian Dollars.
Benefits of FCNR Account
Wondering if FCNR is a feasible investment option for you? Here are some benefits of FCNR deposit for NRIs to invest funds in India.
Tax Exemption
The interest you earn on the FCNR fixed deposit account is free from tax liabilities in India. Plus, the principal and interest amount are fully transferable to the country of residence without any restrictions.
Flexible Tenure
If you are unsure whether you want a short-term or a long-term investment instrument, an FCNR account can be the solution. This is because most banks allow you to opt for a flexible tenure. For example, with IndusInd Bank, you can open a deposit for a minimum of 1 year and maximum 5 years.
Fixed Interest Rate
Since banks determine the interest rate on the FCNR account within the ceiling provided by the RBI, it remains fixed throughout the tenure. Also, the interest amount is payable at the end of 1 year and is compounded on a half-yearly basis.
Simple Process
You can easily open an FCNR deposit for NRIs by submitting minimal documents, such as a copy of visa and passport, proof of residency status, overseas address proof, bank account documents, etc. It also allows you to transfer funds from your Non-Resident External (NRE) Account.
Why Should You Opt for an FCNR Account?
FCNR accounts are excellent to keep your money in foreign currency and protect it from the risk of exchange rate fluctuations. Since it is a term deposit account, it allows you to earn higher, risk-free returns without the need to convert it into Indian Rupees. Some banks also offer foreign currency loans against your FCNR account. However, the terms and amount of the loan may vary from bank to bank.
Additionally, if your residence status changes during the term of the deposit, you can still hold the account until its maturity and eliminate the risk of any loss.
Things to Remember
Before you open an FCNR account, consider the following points-
- As mentioned earlier, interest in an FCNR deposit for NRIis payable post 1 year. Hence, if you choose to close your account before that, you will not earn any interest amount.
- Some banks may charge a penalty for premature withdrawal.
- You cannot open a joint FCNR account with a resident Indian.
Final Thoughts
Let’s face it! Everybody aims to find a secure investment option with high returns for their hard-earned money. Considering the benefits mentioned above, if you want to save your overseas earnings in foreign currency, an FCNR account can be an outstanding choice!
