Here are some things you need to know about FCNR account before opening this account
When a person goes out of India and his residential status changes to a non resident, one of the first things he has to do is manage his resident bank accounts. As per Foreign Exchange Management Act, 2002, a non resident is not allowed to operate regular banking accounts in India. They have to open special non resident accounts with banks to manage their operations.
There are four types of non resident accounts that an NRI can open:
- Non resident external (NRE) account
- Non resident ordinary (NRO) account
- Foreign currency non resident (FCNR) account
- Resident Foreign Currency account
One of the deposits available for non residents to open is called the Foreign Currency Non Resident account. This is a type of fixed deposit account that is available for non residents to open.
If you’re looking at opening an FCNR account, here are some things you need to know about this type of deposit:
- The FCNR account is a fixed deposit account that can be opened for a minimum period of 1 year. After the 1 year period is over, it can be automatically renewed. The maximum period of deposit is 5 years.
- No premature withdrawal is allowed for deposits of less than 1 year. If you withdraw the balance in the FCNR account before maturity, then no pro rata interest is paid out. If the deposit is for a tenure more than 1 year, then the pro rata interest calculation depends on the bank’s policies. The bank’s policies are available on their website.
- The balance in the FCNR account is maintained in foreign currency. It is freely repatriable which means the balance in this account can be freely transferred to an account abroad at any point of time. Both principal and interest amount can be freely repatriated.
- Most banks have a list of foreign currencies which can be used to open an FCNR account. These currencies are US Dollar, British Pound, Euro, Canadian Dollar, Japanese Yen, Australian Dollar. Some banks may have more currencies that they accept for the FCNR account. These banks pay interest in foreign currency as well.
- There is no tax payable on the interest earned on this account. No tax is deducted by the bank on this balance.
- The funds for the FCNR deposit can be transferred through bank transfer from abroad. It can also be transferred from an existing NRE account.
- It is possible to take a foreign currency loan against the FCNR balance as well.