A fixed deposit or term deposit has always been an attractive investment avenue with investors. For NRIs who wish to hold fixed deposits in India with attractive benefits, FCNR can be a great option. Read on to know more about it.
Can NRIs hold term deposits in India? An FCNR (Foreign Currency Non-Resident) bank (B) account, also known as FCNR (B), is a fixed deposit that can be opened by any non-resident Indian (NRI) or a person of Indian origin (PIO) to hold deposits in India in the form of currency of their country of residence.
But does it suit your financial requirements? Here are some important aspects of FCNR deposits and some lesser-known facts that will help you decide.
Nature of FCNR Account
The minimum tenure for an FCNR deposit is 1 year while the maximum tenure is 5 years. Since the money is held in foreign denominations, there is no risk of exchange rate fluctuations. It is an excellent investment avenue for the NRIs who wish to invest in the form of foreign currency to earn attractive returns.
Most of the banks allow FCNR deposits in the form of below currencies:
- US Dollars
- Australian Dollars
- Pounds Sterling
- Canadian Dollars
- Japanese Yen
Must-Have Documents for Opening an FCNR Account
Below documents attested by designated authorities must be submitted along with duly filled application form for opening an FCNR account:
- Proof of NRI/PIO Status
- A valid passport and PAN copy
- Current address and Indian address Proofs
- Passport-sized photo
Apart from being a great source of investment for the NRIs, there are other lesser-known facts about FCNR:
- Interest Earned is Tax-Free: FCNR deposits are tax-free, and no income tax is charged on the interest received on the deposits. This makes the FCNR deposits an attractive investment option for NRIs.
- Both Principal amount and Interest is Repatriable: The principal amount of the deposit and the interest earned on it are both completely repatriable which means that you can transfer the amounts freely to your country of origin, i.e. India.
- A Loan can be Raised Against the FCNR Deposits: You may raise a loan against your FCNR deposits in foreign or Indian currency at selected Indian banks as per the RBI guidelines. These loans are generally available to both corporate as well as non-corporate clients.
- No Interest is Paid if You Withdraw the Deposit Before 1 Year: You will not receive any interest if you choose to withdraw your FCNR deposit before completing 1 year. Also, the bank may or may not charge a penalty if you withdraw the deposit before completion of its tenure, as per the bank rules.
- Interest Rate Varies With the Currency Types: The interest rates vary with different currency types and tenure of the deposits. Also, the rates differ for different banks. Hence, you must consider all these factors before choosing to opt for FCNR deposits.
- You May Opt for Joint FCNR Accounts: You can also hold joint FCNR accounts with another fellow NRI or even Indian residents.
Plan Your Funds With FCNR Deposits
With multiple benefits that FCNR offers, it can be a great addition to your investment portfolio. All you need to do is check out the interest rates offered by different banks for the currency that you wish to invest with. However, you must also ensure to get the deposit with a reliable and reputed bank to avoid any issues later.