This is Part 3 of series of 4 updated articles to update you on the Types of NRI Bank Accounts. We will discuss here the FCNR Account for NRI.
We are giving you complete details of NRI related bank accounts. These are:
NRO Account (Click for Details)
NRE Account (Click for Details)
FCNR Account for NRI (Current Article)
RFC Accounts (Click for Details)
You will find complete details, prevailing interest rates, features, requirements, purpose, allowed credits & other datils of these NRI accounts in the above-mentioned articles.
Let us start with:
The full form of FCNR (B) A/c is – Foreign Currency Non-Resident (Bank) Account.
Only Authorised branches of banks can open FCNR Account for NRI in approved currencies. The a/c can only be opened in the name of NRI individuals – single/joint. Students proceeding abroad for higher studies are treated as Non-residents. They can also open FCNR Bank Accounts.
FCNR Bank Account is of only one type – Term Deposit with a maturity of a minimum 1 year & maximum of 5 years.
These deposits can be opened in the following currencies mainly – -Pound Sterling, US Dollar, Euro, Japanese Yen, Canadian Dollar, and Australian Dollar.
The deposit can be opened as per depositor’s choice, in any of the permitted currencies, with /out of the funds received as foreign inward remittances in convertible currency through normal banking channels. The Foreign Currency Travellers Cheques / Notes may be accepted during temporary visits of the NRI, for credit to the account.
FCNR account can be opened in the names of two or more non-resident individuals provided all the account holders
are persons of Indian nationality or origin. Resident close relative (relative as defined in Section 6 of the Companies Act, 1956) on ‘former or survivor’ basis. The resident close relative shall be eligible to operate the account as a Power of Attorney holder in accordance with extant instructions during the life time of the NRI/ PIO account holder.
Nomination in favour of NRI/PIO or a resident is allowed in the account.
Maturity periods under the FCNR Deposits
(a) 1 year and above but < 2 years; (b) 2 years and above < 3 years ; (c) 3 years and above but <4 years: (d) 4 years and above < 5 years ; (e) Five years only.
Interest is payable in the following manner:
a) For deposits up to one year, without any compounding effect,
b) For deposits for over 1 year, compounding at intervals of 180 days each and thereafter for the remaining actual number of days.
At the request of the depositor, Bank allows premature withdrawal also in case of funds requirement.
Taxability of Income from FCNR Account
Interest income from FCNR (B) accounts is exempt under IT rules. Also, Deposit held under FCNR (B) a/cs is not taxable under Wealth Tax.
FCNR deposit repatriable or not?
-Yes. Funds (Principal & Interest) is fully repatriable in foreign currencies. Also, the proceeds of the account are also repatriable to third parties, if the bank is satisfied with such repatriations.
What happens to FCNR account of NRI returns for good?
If NRI is returning back to India, Banks may allow FCNR (B) deposits NRIs/PIOs, to continue till maturity at the contracted rate of interest, if desired, as per rules.
You can hold the FCNR deposits till maturity, But you should convert them to resident deposits (RFC) and the taxability of interest on these deposits shall have the same treatment as RFC account.
If you continue to hold NRE and FCNR deposits in the same form, the interest will still not be exempt, because Section 10(15)(fa) provides the condition that such accounts/deposits must be approved by the RBI and holding these accounts would violate this condition.
