Whether you reside in India or a Non-Resident Indian, you need a place to store your assets and savings. It is essential to have a Bank Account to keep all the currencies safe without the fear of them getting stolen or lost. You can withdraw the funds from it whenever needed and apply for Loans. You can also use different Debit Cards for the purpose.
A Foreign Currency Non-Resident or FCNR Account is a Term Deposit Account that allows investors to transfer their foreign income to India in the same currency as their resident country. The merger of NRI and foreign portfolio investments with revised interest rates has encouraged NRIs to invest in India.
What are its features?
An FCNR Deposit has savings in a foreign denomination. It is not a Savings Account but a Term Deposit Account with a tenure of one year, exceeding up to five years. The interest income on this account is tax-free in India. The principal, as well as the interest, are freely repatriable to your resident country. You can get both INR and foreign currency Loans against these deposits.
How is it unique?
Among a wide range of NRI Account options in India, these accounts are popular because the currencies can get freely converted. The currencies it accepts include the US Dollar, Pound Sterling, Japanese Yen, Euro, Australian Dollar, Canadian Dollar, Singapore Dollar, Swiss Franc, Hong Kong Dollar, and Danish Krone.
Non-Resident Ordinary and Non-Resident External Accounts are rupee-denominated. Although they accept foreign and Indian currency deposits, they do not allow withdrawals in foreign currency. Moreover, the interest earned on these accounts also differs.
Differences
The NRE FD and Savings Account allow you to earn tax-free interest throughout the tenure. The FD offers higher interest than the Bank Account, maximising your savings. You can withdraw funds in INR and repatriate the entire amount without limitations. You can transfer money from an NRO to NRE Account after providing proper documentation prepared by a Chartered Accountant stating the payment of all the taxes on the funds transferred from the NRO Account.
The NRO FD and Savings Accounts attract taxes as per Indian Income Tax laws. They include a rate of 30% on the interest earned, which is quite high. The FDs do not offer a repatriation option on the principal investment. Only the interest earned can get transferred to a foreign account.
The FCNR interest rates vary with the kind of currency and the deposit tenure. If you withdraw within the first year, there is no interest payment. But if you withdraw it within the tenure, you pay the penalty.
Final words
Open this account by sending remittances from overseas through Internet Banking or directly submitting a request to the bank branch. The deposits in foreign currency accounts are exempt from Indian Income Tax. You can also apply for Loans using this account.