Want to Open an FCNR Account in India? Are You Aware of These Pros and Cons?

Fixed Deposit or FD has always been a popular investment option in India. Unfortunately, FD accounts only allow deposits in INR. This means that NRIs who want to open an FD account can only do so after converting their foreign earnings into INR. But not every NRI is comfortable with this setup. A lot of NRIs want to retain their earnings in foreign currencies.

Such NRIs have the option to open an FCNR (Foreign Currency Non-Resident) account. FCNR deposit accounts can be booked with the most popular foreign currencies, and the returns generated from the investment are in the same foreign currency as well.

But just like any other investment option, NRIs should first try to know the good as well as the bad of FCNR accounts. Here is a list of top pros and cons to help NRIs decide whether or not FCNR is the right option for them-

Pros

1. Deposits and Returns in Foreign Currency

The biggest advantage of the FCNR deposit account is that it can be opened with foreign currencies. Most banks generally allow deposits in USD, GBP, EUR, SGD, CAD, AUD, JPY, and other popular currencies.

Moreover, even the interest generated from the FCNR account is in the currency deposited for opening the account.

2. Tax-Free Interest with Full Repatriation

The interest that your FCNR account earns is tax-free in India. You are not required to pay any interest on the generated income. Not only this, but FCNR accounts are fully repatriable too.

It means that you can transfer the principal amount as well as the generated returns back to your current country of residence.

3. Tenures Ranging from 1 Year to 5 Years

Most top banks in India also offer complete flexibility with regards to the investment tenure of FCNR accounts. You can book an FCNR deposit for a duration ranging from 1 year to 5 years. But note that the tenures can vary for different foreign currencies.

Do consult your bank for the same. The premature withdrawal facility is also generally available with most banks.

Cons

1.  FCNR is Only a Term Deposit Account

Unlike other types of bank accounts for NRIs like NRE and NRO, FCNR is only a term deposit account. You cannot open a saving, current, or recurring deposit account through FCNR.

If any NRI wants to open a saving, current, or recurring account in India, it can only be done through an NRO or NRE account.

2. No Interest on Withdrawal within 1 Year

Most banks do not pay any interest on FCNR account in India if the deposit is prematurely withdrawn within 1 year from the date of investment. There can also be additional penalties involved.

If you prematurely withdraw your FCNR deposit after 1 year, interest will be paid as per the applicable rate for the duration for which the deposit remained with the bank.

Is FCNR Deposit Right for You?

FCNR deposit is an excellent option for any NRI having a long-term savings goal. With guaranteed returns that too in foreign currency, FCNR is a smart way to grow your savings without converting your foreign funds into INR.

Look for a top bank to open your FCNR account and start earning risk-free returns on your foreign earnings.