What is FCNR? Is FCNR a Good Investment Option for NRIs?

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Is FCNR a Good Investment Option for NRIs?

Over the last two decades, India has undergone tremendous industrial progress. As a result, foreign direct investment is increasing in the country (FDI). This has inspired non-resident Indians (NRIs) to regard India as a potential investment and profit-making destination. Every day, the Ministry of Corporate Affairs makes the country more business-friendly. With so many alternatives for investing, NRIs are having difficulty determining which the best are for them for starting a company, One Person Company, LLP’s, or making investments in any other form because starting up of startup is also a form of investment. In this article we’ll discuss the question “Is FCNR a Good Investment Option for NRIs?” in detail.

Table of Content

Is FCNR a Good Investment Option for NRIs? – Key Abstract

Given the variety of possibilities accessible to you as an NRI, the concept of investing in your hometown might be confusing. As a result, the best method to select an investment vehicle is to be clear about your investing goals and desires. The FCNR fixed deposit account is one possible alternative for saving money in foreign currency.

Is FCNR a Good Investment Option for NRIs? – Foreign Currency Non-Resident Account (FCNR)

FCNR is an abbreviation for Foreign Currency Non-Resident Account. If you are an NRI and want to have a Fixed Deposit Account in India, you may open an FCNR Account, which allows you to store money earned abroad in foreign currency. Banks often record FCNR deposits in the currencies listed below.

  • Dollars, 
  • Pounds Sterling, 
  • Euros, and 
  • Dollars, 
  • Dollars of Australia
  • Dollar of Canada

FCNR Accounts are a wonderful investment choice for NRIs who want to keep their money in foreign currency while earning significant returns. Because your funds will be stored in another currency, you will be spared the danger of currency swings. You will also receive larger, risk-free returns as a result of this. You can also open an FCNR Account if you are confused about where to save or invest your hard-earned money.

Is FCNR a Good Investment Option for NRIs? – Features of FCNR

Here are some characteristics of an FCNR Account that make it an incredibly viable alternative for investing and retaining cash in India:

  • FCNR Accounts are not Savings Accounts, but rather Term Deposit Accounts. Banks allow for early withdrawal, but interest is only paid after one year.
  • You can create an FCNR Account by moving funds from your current Non-Resident External (NRE) Account.
  • The interest you earn on your FCNR Account deposits is tax-free, i.e. it is not taxable in India.
  • The principal amount of your FCNR deposit and the income earned on it are fully repatriable, i.e., transferable.
  • You can also get an overdraft on your FCNR Term Deposit Account.

As a result, if you’re searching for a way to save money in foreign currency, FCNR Accounts are a great solution.

Is FCNR a Good Investment Option for NRIs? – FCNR Account Advantages

Do you want to know if FCNR is a viable investment choice for you? Here are some of the advantages of an FCNR deposit for NRIs looking to invest in India.

  • Exemption from taxes: In India, the interest you earn on your FCNR fixed deposit account is tax-free. Furthermore, the principal and interest amounts are entirely transferrable to the nation of domicile with no limitations.
  • A tenure that’s not fixed: An FCNR account may be the option if you are undecided whether you want a short-term or long-term investment tool. This is due to the fact that most banks enable you to choose a flexible repayment period. For example, you can create a deposit with IndusInd Bank for a minimum of one year and a maximum of five years.
  • Fixed-Rate of Interest: Because banks set the interest rate on the FCNR account within the RBI‘s cap, it remains constant during the period. In addition, the interest is compounded every six months and is repaid at the end of a year.
  • The process is straightforward: NRIs can simply open an FCNR deposit by submitting only a few papers, such as a copy of their visa and passport, evidence of resident status, proof of foreign address, bank account paperwork, and so on. You can also transfer money from your NRE (Non-Resident External) Account.

Benefits of Having an FCNR Account

FCNR accounts are a great way to store your money in foreign currency while avoiding the danger of currency swings. Because it is a term deposit account, you may receive greater, risk-free rates without having to transfer your money into Indian rupees. Some banks will lend you money in foreign currency if you have an FCNR account. The conditions and amount of the loan, however, may differ from one bank to the next. Furthermore, if your resident status changes during the duration of the deposit, you can still keep the account until it matures and avoid any potential losses.

Points to Ponder

Consider the following points before opening an FCNR account. –

  • As previously stated, interest on an FCNR deposit for NRIs is paid after one year. As a result, if you terminate your account before then, you will not get any interest.
  •  Some banks may impose a penalty if you remove money too soon.
  • A combined FCNR account with a resident Indian is not possible.

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Final Thoughts

Let’s face it, it’s a fact! Everyone wants to discover a safe investment choice that will provide them a good return on their money. Given the advantages listed above, an FCNR account may be an excellent alternative for you if you wish to save your international profits in foreign currency. Hence, in conclusion, we can answer the question “Is FCNR a Good Investment Option for NRIs?” in the affirmative, that yes FCNR is a Good Investment Option for NRIs.

Please contact our specialists for additional information on this subject.

CS Urvashi Jain is an associate member of the Institute of Company Secretaries of India. Her expertise, inter-alia, is in regulatory approvals, licenses, registrations for any organization set up in India. She posse’s good exposure to compliance management system, legal due diligence, drafting and vetting of various legal agreements. She has good command in drafting manuals, blogs, guides, interpretations and providing opinions on the different core areas of companies act, intellectual properties and taxation.

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