5 Advantages of Opening FCNR Fixed Deposits
As a Non Resident Indian, you would be earning your income in the currency of the country you are based in. If you are based in USA, you’d be earning US Dollars; if you live in UK, you would be earning GBP and if you are residing in any country in the European Schengen region, you’d be making a living in EUR. These currencies are stronger than INR and if you can create any savings from your earnings, you can create a special fixed deposit in the form of a Foreign Currency Non Repatriable Deposit, also known as FCNR deposit. Here are some of the biggest advantages of opening an FCNR FD.
FDs can be created in a wide range of major foreign currencies
The Reserve Bank of India (RBI) permits non- resident Indians to create a wide range of NRI fixed deposits, including deposits for NRE and NRO accounts. However, there are only certain currencies in which the NRE/NRO deposits can be created. In comparison, Foreign Currency Non Repatriable Deposits can be created in a wide range of foreign currencies like GBP, EUR, JPY, USD, AUD, CAD, NZD, SGD and HKD. Apart from the dollar currencies deposits may also be created in SFr, DKK, and SEK as per the revised RBI regulations for ‘permitted currencies’ in 2011.
Interest is earned in foreign currencies
Since your FCNR India deposit is a foreign currency deposit, the interest you earn on it is also paid out in the currency of deposit. So, if your FD is created in Swedish Krona, the interest you earn is also in SEK. This proves incredibly beneficial when you create an FD in a very strong currency. Additionally, the interest rates on these FDs are also quite good, making it a worthwhile investment.
You do not have to pay any taxes on interest earned
You need to pay taxes on the interest earned on your NRO FDs. However, when it comes to foreign currency deposits, you do not have to pay any taxes on the interest earned on these FDs in India. This is a great advantage which allows you to maximise your return on investments. However, you should confirm the taxation laws of your country of residence since you may be required to pay taxes on the interest earned in that country.
You get flexible investment tenures
For creating a foreign currency FD for NRIs, you get flexible investment tenures. The overall returns you earn on your investment largely depend on the tenure chosen. Generally, this FD can be created for minimum and maximum tenures of 1 and 5 years respectively. The higher the tenure you choose, the higher will be the returns earned. You may also prematurely withdraw your FD by paying a small 1% penalty.
You can apply for loans and overdrafts against your FD
Another advantage of creating an FCNR deposit is that it comes in handy when you need loans or overdraft. The overdraft facility can be utilised against the foreign currency deposit. Also you can avail personal, home, vehicle and other big and small loans, both in India as well as your residency country against the FD. The FD serves as collateral against the loans.
Final word: FCNR India deposits are specially created for NRIs. These FDS can be created by depositing cash or cheques on your visit to India. However banks are mindful of the fact that you cannot always visit India so you can utilise the internet banking facilities provided by your bank to create your foreign currency FDs.