FCNR for UPSC

An NRI FCNR account is a Foreign Currency Non-Resident account, which allows Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) to maintain a fixed deposit in an Indian bank in a foreign currency. 

This type of account is a popular option for managing overseas earnings because it protects funds from rupee exchange rate fluctuations and the interest earned is tax-free in India. 

Key Features

Currency Holding: Funds are held in major foreign currencies such as the US Dollar (USD), British Pound (GBP), Euro (EUR), and Japanese Yen (JPY), not in Indian Rupees.

Account Type: It is strictly a term deposit or fixed deposit account with a fixed tenure, typically ranging from one to five years; it cannot be a savings or current account.

Taxation: The principal amount and the interest earned are fully exempt from Indian income tax.

Repatriability: Both the principal and interest are fully and freely repatriable, meaning they can be transferred back to an overseas account without any restrictions.

Funding: The account can be funded by inward remittances from abroad or by transferring funds from an existing NRE (Non-Resident External) account.

Loan Facility: Investors can avail loans or overdraft facilities against the FCNR deposit as collateral, providing liquidity without breaking the deposit.