All you wish to find out about Foreign Currency Non Resident (FCNR) account
The long run and chronic depreciation in Indian Rupees leads to, international foreign money denominated funding merchandise, typically giving increased returns by way of Indian rupees over time. In addition to actual property and Indian fairness funding in India, Foreign Currency Non Resident (FCNR) account additionally affords a protected and liquid funding alternative to NRIs. Let us focus on numerous options of FCNR account.
Basic options of the account
The FCNR account can solely be opened as a set deposit and solely in “permitted foreign currency” freely convertible in Indian rupees. These include various foreign currencies like Pound Sterling, US Dollar, Canadian Dollar, Australian Dollar, EURO and Japanese Yen etc.. These accounts can be opened for a period between one year and five years. In case of premature withdrawals, you have to pay penalty in terms of reduction in the interest rate which you will get. However, in case the deposits under FCNR are liquidated before completion of one year, no interest is payable.
Loan can be taken against FCNR deposits for personal or business needs but not for the purpose of onward lending or for acquiring agricultural land or for any real estate business. However you can use the money for acquiring any flat or house for your own residence in India.
Who and how of opening of FCNR account
Any person who is an Indian Citizen and a non-resident under FEMA can open an FCNR account. Moreover, non-Indian Citizen and Person of Indian Origin are also allowed to open the FCNR account. Both these categories of persons are collectively referred to as NRI under FEMA. The FCNR account can be opened in single or joint names but in case of joint account the joint holder also needs to be an NRI. Your relatives are allowed as joint account holder on “former or survivor basis”. Like different financial institution accounts, you’ll be able to appoint nominee in your FCNR account and the nominee needn’t be an NRI. The FCNR account may be opened with cash transferred in international foreign money by way of banking channel exterior India or by switch out of your NRE account or another FCNR account or by means of a cheque drawn on any checking account maintained in international foreign money. It can be opened by tendering traveller cheques or international foreign money whereas travelling to India.
It is just not obligatory so that you can be bodily current in India for opening an FCNR account. The NRIs can open this account within the abroad department however have to submit some fundamental paperwork like copy of passport, proof of international handle and so on.
Interest fee and Exchange fee
The fee of curiosity for FCNR account for every of the foreign money is completely different. The rate of interest on FCNR account is mostly decrease than the speed for deposits of Indian residents. However, the speed of curiosity on the FCNR accounts is mostly increased than provided of their nation of residence. Since these accounts are opened in international foreign money, there isn’t any danger as a result of modifications within the trade fee of the foreign money of the deposit and Indian foreign money. As the trade fee danger is eradicated and the speed of curiosity provided is increased than these provided by their dwelling international locations, these deposits supply a greater danger free funding alternative to the NRIs. The curiosity credited in FCNR account and the principal quantity in FCNR account is totally repatriable and may be freely remitted exterior India with none permission from RBI. The curiosity can be credited to your NRE or NRO account.
Taxation of the curiosity on FCNR
The curiosity on FCNR account is exempt from tax in India however could also be taxable in nation of your residence relying in your residential standing beneath the nation of your residence. In case you change into a resident beneath FEMA, if you return again to India for good, the curiosity on FCNR account will nonetheless be exempt until the maturity of the FCNR account. This is in distinction to the curiosity on NRE account which stays tax exempt until you’re a non-resident beneath FEMA and turns into taxable instantly on turning into resident beneath FEMA.
Balwant Jain is a tax and funding knowledgeable and may be reached on jainbalwant@gmail.com and @jainbalwant on Twitter.
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