What is an FCNR account?

Indians staying abroad want to take advantage of the high interest rates back home and usually remit money back to invest in fixed deposits. Moreover, as an NRI, you don’t pay any income tax on the interest generated, if your deposit is in an NRE account. Investors usually forget about the USD-INR or AED-INR currency fluctuations that can impact the gains earned from deposits. Over the past few years, the INR has been depreciating against the USD, resulting in the INR value dropping, especially if you intend to repatriate the funds. The solution to this is Foreign Currency Non-Resident (FCNR) accounts. FCNR accounts are term deposit accounts only, and are used for depositing foreign currency.

Deposits can be in which currency:
FCNR:
Deposits can be maintained in six foreign currencies - US Dollar (USD), British Pound (GBP), Japanese Yen (JPY), Euro (EURO), Australian Dollar(AUD) & Canadian Dollar (CAD).
NRE:
Deposits can only be maintained in Indian Rupee (INR)
Interest Rates on Deposits:
FCNR:
Interest rates vary based on the currency.
NRE:
Interest rates are same as the ones offered to other account types. Interest rates are usually higher than FCNR.
Joint Account:
FCNR:
An NRI with a resident relative or two or more NRIs can open joint accounts. A resident account holder can operate only as a Power of Attorney (PoA) holder.
NRE:
An NRI with a resident relative or two or more NRIs can open joint accounts. Primary account holder has to be an NRI.

In both FCNR and NRE accounts, there is no Income Tax on the interest charged by India. Moreover, there is no limit on the amount that can be repatriated in a year.

FCNR accounts can safeguard your funds in case the INR value is forecast to depreciate against the deposited currency. Along with interest on deposits, FCNR is a safe mode of long-term investment, particularly if you intend to repatriate the money outside India. All major banks in India have the facility to open FCNR deposit accounts.