Are you relocating overseas? Concerned about handling your money matters in India? Or are you looking to invest in India or provide for your family? These might be relatively normal worries if you are an NRI. Additionally, you may have two sources of income: one from your place of residence and another from assets in India. FCNR FD (Foreign Currency Non-Resident Fixed Deposit) accounts are designed to help such NRIs manage their finances effectively. Let’s explore FCNR FD, its benefits and features, and the top banks offering the best FCNR deposit rates.
What is an FCNR FD?
Persons of Indian Origin (PIOs) and Non-Resident Indians (NRIs) can deposit their foreign income in Indian banks through a sort of term deposit called an FCNR (Foreign Currency Non-Resident) FD (Fixed Deposit). These deposits are maintained in foreign currencies, offering a way to earn returns without being affected by fluctuations in exchange rates.
Eligibility for FCNR FD
People who fall into the following categories can create an FCNR FD account in India:
- Non-Resident Indians (NRIs)
- Persons of Indian Origin (PIOs), also known as Overseas Indians
Note: People who are Indian by birth or descended from Indians are called Persons of Indian Origin. There can be an exception for those who live in Pakistan and Bangladesh.
Factors to Consider Before Choosing FCNR FD
Before opting for an FCNR fixed deposit investment, consider the following aspects:
- Family: Find out if a family member or relative in India can use the bank’s mandate card to manage the account.
- Currency: Review the available FCNR currency denominations and assess the associated risks of currency rates.
- Tax: Understand if the principal and interest from the FCNR FD account are taxable in the depositor’s country of residence.
- Repatriability: Ensure that banks can repatriate the funds in the FCNR fixed deposits account back in the foreign currency.
FCNR FD Account Benefits
- Loans Against Funds: Banks may lend money to account holders secured by the funds in FCNR FD accounts.
- Foreign Currency Loan Repayment: The maturity proceeds can be used to repay foreign currency loans outside India.
- Repatriability: The interest and principal are freely repatriable to the depositor’s country of residence without any restrictions.
- No Forex Rate Risks: FCNR accounts are maintained in a foreign currency, so there is no risk of exchange loss.
- Tax Exemption: Interest earned on FCNR deposits is exempt from tax in India.
FCNR FD Account Features
- Interest Compounding: Interest rates are compounded on a half-yearly basis and payable after the end of the first year.
- Flexible Tenure: FCNR accounts have a minimum term of 1 year and can extend up to 5 years.
- Joint Accounts: FCNR FD accounts can be jointly held by two or more NRIs, but joint accounts with Indian residents are not allowed.
- Multiple Currencies: FCNR accounts can be opened in major currencies such as USD, Japanese Yen, and Euro.
FCNR Fixed Deposits Tax Implications
According to the Income Tax Act 1961, the tax treatment related to FCNR fixed deposits is as follows:
- Investment Tax-Free: Any investment made in an FCNR FD account is not taxable in India.
- Interest Tax-Free: Any interest earned on the above is also not taxable in India.
FCNR Fixed Deposits Disadvantages
- Bank Default Risk: There is a risk that the bank may not be able to pay back upon maturity. The credit guarantee in India is limited to ₹5,00,000, which may be a concern.
- Taxation in Residence Country: The interest earned on FCNR FDs may be taxable in the NRI’s country of residence.
- Premature Withdrawal: Premature withdrawal can result in penalties, and no interest is paid if withdrawn before a year.
- Limited Account Types: FCNR deposits are only offered for term deposits, not for savings, recurring, or current accounts.
- Financial Meltdown Risk: In case of a financial meltdown, banks may not be able to repatriate funds.
- Loan Restrictions: The only people in India who can obtain foreign currency loans against FCNR accounts are account holders.
Premature Withdrawal And Tenure for FCNR Deposits
Premature withdrawal rules for FCNR FDs differ from bank to bank. Some banks might not pay interest if the deposit is withdrawn before 12 months, while others may impose penalties. It’s essential to check your bank’s specific premature withdrawal policies before investing.
Recent RBI regulations state that FCNR deposits can be held for up to 5 years, with a minimum tenure set at 1 year.
Top Banks FCNR FD Interest Rates
SBI FCNR FD Interest Rates (Effective from March 15, 2024)
| Period of Deposit | USD Rate (%) | GBP Rate (%) | EURO Rate (%) | CAD Rate (%) | AUD Rate (%) |
| 1 year | 5.65 | 5.10 | 4.00 | 4.50 | 4.50 |
| Above 1 year to less than 2 years | 5.65 | 5.10 | 4.00 | 4.50 | 4.50 |
| 2 years to less than 3 years | 4.50 | 5.00 | 1.50 | 4.10 | 4.40 |
| 3 years to less than 4 years | 4.30 | 4.00 | 1.50 | 3.85 | 4.30 |
| 5 years | 3.90 | 3.90 | 1.50 | 3.95 | 4.10 |
ICICI FCNR FD Interest Rates (Effective from July 10, 2024)
| Period of Deposit | USD Rate (%) | SGD Rate (%) | AUD Rate (%) | GBP Rate (%) | CAD Rate (%) |
| 1 year to less than 2 years | 5.65 | 3.75 | 4.40 | 5.00 | 4.65 |
| 2 years to less than 3 years | 4.10 | 2.75 | 3.75 | 4.00 | 3.30 |
| 3 years to less than 4 years | 3.90 | NA | NA | NA | NA |
| 4 years to less than 5 years | 3.50 | NA | NA | NA | NA |
| 5 years | 3.50 | NA | NA | NA | NA |
Canara Bank Interest Rates on FCNR FD Deposits (Effective June 12, 2024)
| Period of Deposit | USD Rate (%) | GBP Rate (%) | EURO Rate (%) | CAD Rate (%) | AUD Rate (%) |
| 1 year to less than 2 years | 5.65 | 5.00 | 3.00 | 4.50 | 4.00 |
| 2 years to less than 3 years | 4.30 | 3.00 | 2.00 | 4.00 | 3.50 |
| 3 years to less than 4 years | 4.00 | 2.50 | 1.50 | 3.85 | 3.00 |
| 4 years to less than 5 years | 4.00 | 2.50 | 1.50 | 3.50 | 3.00 |
| 5 years | 4.00 | 2.50 | 1.50 | 3.50 | 3.00 |
Notes:
- The annualised yield is calculated at the period’s end.
- Interest rates are subject to change without prior notice.
- For 1 year’s FCNR deposit, simple interest is applicable.
- For FCNR deposits above 1 year, interest is compounded at half-yearly frequency.
Also Read More About Mutual Fund vs Fixed Deposit
Conclusion
FCNR FDs provide an excellent opportunity for NRIs to park their foreign income in Indian banks while earning attractive returns. By understanding the features, benefits, and potential drawbacks, you can make an informed decision about opening an FCNR FD account. Utilise the provided interest rates from top banks to compare and choose the best option for your fixed deposit investment needs. With FCNR deposits, you can manage your financial affairs in India securely and efficiently while enjoying the benefits of favourable interest rates and tax exemptions.
FAQs
Which foreign currencies may be deposited using FCNR?
FCNR deposits can be made in major foreign currencies such as USD, GBP, EUR, CAD, AUD, and others. These currencies provide flexibility and ease of investment for NRIs.
Is FCNR a good investment?
Yes, FCNR deposits offer attractive interest rates, tax exemptions in India, and protection against forex risks. They provide a secure way for NRIs to earn returns on their foreign income.
Are my FCNR Fixed Deposit funds repatriable?
Yes, both the principal and interest from FCNR deposits are fully repatriable without restrictions. This allows NRIs to freely transfer their funds back to their country of residence.
Is interest accumulated on the FCNR account subject to taxation in India?
No, the interest earned on FCNR deposits is exempt from tax in India. This makes FCNR accounts a tax-efficient investment option for NRIs.
Can I get loans against my FCNR Deposits?
Yes, banks provide loans against funds in FCNR FD accounts. These loans can be availed in foreign currency in India, offering additional financial flexibility.
Can I withdraw from my FCNR account prematurely?
Yes, premature withdrawals are allowed but may result in penalties and reduced interest if done before one year. It is important to check the specific terms with your bank.