Foreign Currency Non-Resident accounts: In nine currencies, no tax and repatriable

Foreign currency for your accounts. Photo courtesy: Kaustubh Shankar
Foreign currency for your accounts. Photo courtesy: Kaustubh Shankar

In our NRI personal finance series this time we look at the rules governing Foreign Currency Non-Resident (Banks) accounts.

Below are some of the dos and don’ts for an FCNR(B), according to the Reserve Bank of India:

  • NRIs and PIOs can open this account. It may be held by two or more NRIs/PIOs. Individuals or entities of Pakistan and Bangladesh require prior approval of the RBI.
  • NRIs/ PIOs can hold this account jointly with a resident relative on ‘former or survivor’ basis. The resident relative can operate the account as a Power of Attorney holder during the lifetime of the NRI/ PIO account holder.
  • It can be in any permitted foreign currency which is freely convertible. Banks offer to open accounts in nine currencies which are US dollar, GBP, Euro, Japanese Yen, Australian Dollar, Canadian Dollar, Swiss Francs and Hong Kong Dollar.
  • The accounts are only in term deposits with tenures of not less than 1 year and not more than 5 years
  • Credits permitted to this account are inward remittance from outside India, interest accruing on the account, interest on investment, transfer from other Non-Resident External/ FCNR(B) accounts, maturity proceeds of investments (if such investments were made from this account or through inward remittance).
  • Permissible debits are local disbursements, remittance outside India, transfer to other NRE/ FCNR(B) accounts and investments in India.
  • They are repatriable so you can take the money out of India.
  • Income earned in the account is exempt from income tax and balances exempt from wealth tax
  • You can take loans against these accounts without any limit but these loans cannot be repatriated outside India and can be used in India only for the purposes specified in the regulations.
  • In case of loans sanctioned to a third party, there should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual/ firm/ company to obtain such facilities.
  • In case of the loan sanctioned to the account holder, it can be repaid through the deposits or through remittances from outside India or out of balances held in the NRO account of the account holder.
  • Operations in the account by a Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.
  • On change in residential status, FCNR (B) deposits may be allowed to continue till maturity at the contracted rate of interest. On maturity they should be converted into resident rupee deposit accounts.
  • A Foreign Portfolio Investor or a Foreign Venture Capital Investor, both registered with the Securities and Exchange Board of India (SEBI) can open and maintain a non-interest bearing foreign currency account for the purpose of making investment

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Note: Connected to India articles on NRI personal finance are intended to help Non-Resident Indians (NRIs) understand the increasingly complex world of financial investments.