Contents
Definition
An FCNR(B) — Foreign Currency Non-Resident (Bank) — account is a term deposit maintained in India in a foreign currency, allowing NRIs to earn interest on overseas savings without bearing exchange-rate risk on the principal. Governed by RBI Master Direction FEMA.5(R)/2016-RB and the FCNR(B) scheme guidelines, deposits are accepted in six RBI-approved currencies: USD, GBP, EUR, JPY, AUD, and CAD. Tenures range from 1 year to 5 years. Both principal and interest are fully repatriable and exempt from Indian income tax under Section 10(4)(i) of the Income Tax Act 1961, which exempts interest received by an NRI on FCNR(B) deposits from any Indian scheduled bank.
Eligibility + How to Open
Eligible depositors: NRIs and PIOs (including OCIs per RBI 2023 clarification). Resident Indians are not eligible. The account can only be opened as a term (fixed) deposit — no savings or current variants exist under FCNR(B). Minimum deposit amounts vary by bank; most set minimums at USD 1,000 or equivalent. KYC documents required:
- Passport with valid visa or OCI/PIO card
- Overseas address proof not older than 3 months
- PAN or Form 60
- Source of funds declaration for amounts above USD 25,000 (per bank internal AML policies)
FCNR(B) deposits can be funded by inward remittances from abroad or by transfer from existing NRE accounts. They cannot be funded from NRO accounts. Joint accounts are permitted only between NRIs; resident relatives cannot be co-depositors. Upon maturity, proceeds can be credited to the NRE savings account or re-invested in a fresh FCNR(B) deposit.
Tax Treatment
Interest income on FCNR(B) deposits is fully exempt from Indian income tax under Section 10(4)(i) of the Income Tax Act 1961. No TDS is deducted. This exemption persists for RNOR individuals during the RNOR transition period (up to 2 financial years after return to India). Once the holder becomes a full Resident Indian, the exemption ends and the deposit must be converted to a resident account (RFC or domestic FD). FCNR(B) deposits retain currency denomination through maturity — no exchange-rate risk on the principal itself. Premature withdrawal may attract a penalty (typically 0.5-1% deduction from applicable rate) as per individual bank policies within RBI guidelines.
Repatriation / Remittance Rules
Both principal and interest on FCNR(B) deposits are fully and freely repatriable — no monetary cap, no RBI approval required, no Form 15CA/CB required for the primary remittance. At maturity, the deposit can be:
- Remitted directly to the overseas bank account in the original or any other approved currency
- Transferred to an NRE account in Indian rupees at the prevailing exchange rate
- Re-invested in a fresh FCNR(B) deposit
Premature repatriation is permitted without restrictions, subject to the bank's premature-withdrawal penalty. The principal is repaid in the original foreign currency.
Worked Example
Anil, an NRI in London, has GBP 50,000 in a UK current account earning negligible interest. He opens a 3-year FCNR(B) GBP deposit with his Indian bank at 4.5% p.a. Annual interest: GBP 2,250. Tax in India: Zero under Section 10(4)(i). Tax in the UK: Anil must report this interest under UK income tax rules — no Indian TDS to credit. At maturity in 2029, Anil receives GBP 50,000 plus GBP 6,750 accumulated interest directly to his NRE account or his UK bank. No RBI approval needed. The GBP principal is fully preserved regardless of INR/GBP exchange movements.
Common Mistakes
- Confusing FCNR(B) with NRE FD: NRE FDs are rupee-denominated (exchange-rate risk on principal); FCNR(B) are foreign-currency-denominated (no exchange-rate risk on principal).
- Funding from NRO: Only NRE or fresh foreign remittances can fund FCNR(B). Using NRO funds is not permitted.
- Missing renewal instructions: Banks auto-renew at prevailing rates without notifying customers if no instruction is given — rates may differ materially from the original deposit rate.
See Also
- NRE Account
- Repatriable Funds
- LRS (Liberalised Remittance Scheme)
- NRI Investing from Abroad — Complete Guide
- ICICI Bank
Primary Sources
- RBI Master Direction FEMA.5(R)/2016-RB — rbi.org.in
- Income Tax Act 1961, Section 10(4)(i) — incometax.gov.in
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