Is the interest earned on FCNR(B) deposits tax-free?

Yes, the interest earned on FCNR(B) accounts is completely tax-free in India, provided that you are an NRI or PIO. No TDS is deducted on the interest accrued on your deposits.

Can a resident relative living in India operate my FCNR(B) account?

Yes, a resident relative can operate your account provided that they are a joint account holder. The resident relative can only operate the account as a power of attorney holder. Note that a resident POA can only operate the account to make local payments and cannot act as the primary account holder during the lifetime of the account holder.

Is my currency principal amount protected from currency inflation?

Yes, since the deposit amount is held in denominations of the foreign currency and the transactions and deposits are also made in the same currency, your principal amount is protected from all kinds of currency fluctuations.

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FCNR Account

Foreign Currency Non-resident Accounts (Banks) Scheme is a deposit account designed for non-resident Indians and Persons of Indian Origin to deposit foreign currencies and accepts deposits in any permissible foreign currency which can be freely converted.

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What is an FCNR (B) Account?

Foreign currency non-resident accounts (banks) commonly known as FCNR(B) are accounts meant for foreign currency deposits and can only be opened and operated by NRIs and PIOs. The account can only be maintained as a fixed deposit and is regulated by the Foreign Exchange Management Regulations 2016.

Permissible Foreign Currencies

The following are the foreign currencies in which a Non-Resident Indian can deposit their money in the Foreign Currency Non-resident Bank Account.

Note that these currencies are generally offered by banks and not an RBI-mandated list.

Abbreviation	Full Form
AUD	Australian Dollar
CAD	Canadian Dollar
CHF	Swiss Franc
EUR	Euro
GBP	Great Britain Pound
HKD	Hong Kong Dollar
JPY	Japanese Yen
SGD	Singapore Dollar
USD	United States Dollar

Features of FCNR (B) Account

Let's look at the key features of an FCNR (B) account:

Eligibility: Only NRIs and PIOs can open the account with authorised dealers, authorised banks and regional rural banks.
Account form: It is essential to note that FCNR accounts can only be held in the form of fixed deposits.
Joint accounts and power of attorney: Two or more NRIs or PIOs can open a joint FCNR account. An NRI/PIO can also open a joint account with a resident of India on a former or survivor basis. However, a resident joint account holder can only operate the account as a power of attorney and not as the primary account holder during the lifetime of the primary holder of the account. A resident PoA holder can only make transfers of funds to the non-resident account holder or make local payments in India.
Loans: Dealers authorised by the RBI can grant loans and overdrafts facility against an FCNR account as security subject to a standard margin requirement. The loans availed against a FCNR(B) account must be utilised in India and cannot be repatriated outside India.
Change of status: In case the non-resident returns to India and indicates to remain in India for an undetermined period, the FCNR(B) should be designated as a resident account, or the balance can be transferred into a resident foreign currency account.
Death of the account holder: If the account holder dies, the balances can be transferred to the non-resident nominee.
Taxation: Any interest earned on an FCNR fixed deposit is completely exempted from tax as long as you enjoy an NRI status.

Why Should I Open an FCNR Account?

An FCNR account can provide account holders with various benefits to NRIs and PIOs who wish to deposit their foreign earnings in India. Let’s look at some key benefits of an FCNR account:

Protection against exchange rate: FCNR accounts are completely maintained in permissible foreign currency, which is also freely convertible. Your funds remain in the denominations of the foreign currency and do not convert into Indian rupee, which protects your deposit from exchange rate fluctuations and potential rupee depreciation.
Complete repatriability: Your initial deposit and any interest earned on that deposit are freely repatriable outside India. You can transfer the money from your account to an overseas account and vice versa without any restrictions.
Competitive interest rates: Since FCNR accounts can only be maintained at fixed deposits, the banks provide account holders with attractive interest rates on their deposits.
High borrowing power: You can avail a loan or an overdraft against your FCNR account as security. These credit facilities can be used for personal as well as business activities. However, it is important to note that the loan availed against an FCNR account cannot be used outside of India.
Easy local operation: You can have a resident join account holder on your FCNR account on a “former or survivor basis.” A resident relative can also be given the power of attorney to act on your behalf and carry out day-to-day transactions.
Seamless transitions: If you return to India for employment or to reside for an uncertain period of time, you can either transfer your funds into a Resident Foreign Currency Account or designate your FCNR account as a resident account. Funds kept in an RFC account can be maintained in the foreign currency denominations and are entirely free from repatriation or utilisation restrictions overseas.

Latest RBI Update on FCNR(B) Deposits

As of June 8 2026, the RBI has introduced a temporary dollar-rupee forex swap facility. This facility aims at incentivising the inflow of foreign currency by switching the responsibility of currency hedging from the banks to the RBI, allowing banks to elevate their interest yields. Let's look at the key provisions of the US Dollar-Rupee forex swap facility.

Swap Mechanism: Before the facility, banks accepted foreign currency deposits hedged against exchange rate risk, which cost them about 2.8% to 3%. As per the latest update, the RBI completely absorbs these hedging costs. The bank thus sells the US dollars to the RBI at the prevailing exchange rate. After the swap period ends, the bank buys the same dollar amount from the RBI at the same rate at which it sold the dollars to the RBI.
Removal of interest rate caps: The RBI has removed the standard interest rate caps on the deposits because banks do not have to bear the hedging cost. This has allowed banks to increase the interest yield up to 7%.
Tenure: This structure is only applicable to tenures of 3 to 5 years.
Lock-in period: If your FCNR holding is booked under this scheme, they have a strict 1-year lock-in period
Time-bound deadline: Eligible fresh or renewed deposits must be booked or renewed between the dates of June 6 2026, and September 30 2026.

FCNR Deposit Rates

The following table lists the interest rates offered by major banks in India for a 3-4 year tenure across various currencies.

Bank	USD	AUD	JPY	CAD	EUR
AU Small Finance Bank	7.10%	-	-	3.00%	2.00%
Punjab National Bank	6.40%	5.40%	0.23%	4.80%	4.90%
Kotak Mahindra Bank	6%-6.15%	3.85%	-	-	1.90%
HDFC Bank	6.00%	6.25%	-	4.50%	4.50%
ICICI Bank	6.00%	6.25%	-	4.50%	-
Axis Bank	6.00%	6.25%	0.01%	4.50%	4.50%
Bank of Baroda	6.00%	4.60%	-	5.00%	3.50%
State Bank of India	3.35%	4.05%	0.40%	1.25%	1.25%

As of August 2026

Funds That Can be Deposited Into an FCNR (B) Deposit

FCNR accounts have similar credit and debit guidelines as Non-Resident External accounts. The following funds can be deposited into an FCNR account:

Direct Overseas Transfers: Transfers from outside India in any permissible foreign currency sent through normal bank channels.
Transfers from NRE accounts: You can transfer funds held in your NRE account, other FCNR accounts and NRO account. Transfers from an NRO account are capped at $1 million per financial year.
Investment returns and local earnings: Interests earned on your FCNR(B) account deposit, interest earned on investments or the proceeds earned on maturity of your investment account can be transferred into an FCNR account.
Transfers due to a change in the residential status of the individual: If your residential status changes from a resident to a non-resident, you can have the balances held in your exchange earners foreign account (EEFC) and the balances held in your resident foreign currency account transferred into your FCNR account.

Things You Should Know Before Opening an FCNR Deposit

The most important things you should keep in mind before opening an FCNR deposit are as follows:

An FCNR account cannot be opened as a savings or a recurring deposit. It is mandatory for your FCNR account to be a fixed deposit.
Deposits can only be held in the permissible currencies which are freely convertible. You do not have to face any currency conversion or rupee depreciation risk at maturity because your funds are maintained and paid out in the original currency.
Standard FCNR deposits carry tenures between 1 and 5 years.
FCNR deposits carry a strict 1-year lock-in period. If the deposit is broken during this period, no interest is paid on your deposit.
Interest earned on an FCNR deposit is completely tax-free. No TDS is deducted by the Indian bank on FCNR interest, and the account holder is also not required to declare this interest in their ITR while the NRI status is held.

How Can NRIs Make the Most of an FCNR Deposit?

While an FCNR deposit has various benefits, it is important for NRIs to know how to make the most of their accounts to ensure that they are able to truly benefit from their FCNR holdings.

The temporary FCNR(B) special swap window will close on 30th September. Booking or renewing your FCNR deposits before 30 September will help your deposit benefit from the high interest rates on USD. Target the 3-5 year tenure for your deposit as the benefit is only available for a 3-5 year tenure. Ensure you renew any maturing deposit before 30 September 2026.

The Deposit Insurance and Credit Guarantee Corporation insure deposits up to ₹5 lakh per depositor, per bank. Split your holdings across various banks, as any amount exceeding the ₹ 5 lakh limit held in a single bank will be classified as an unsecured claim.
Since FCNR accounts are accompanied by a lock-in period, if you need emergency funds at any point during the term of the deposit, use credit facilities such as loans and overdraft facilities rather than withdrawing money from your deposit.
If you relocate to India and your status changes, you do not have to convert your foreign currency into rupees. You can transfer your funds into a resident foreign currency account, which maintains your funds as foreign currency, fully free from utilisation or overseas repatriation restrictions.

Eligibility Criteria for FCNR Account

If an individual has to open an FCNR (B) account, the following is the eligibility criteria for account opening:

The individual has to be a Non-Resident Indian (NRI) or Person of Indian Origin (PIO) or Overseas Citizen of India (OCI).
A joint account can be held with other NRIs.
The individual must have held an Indian passport issued by the Government of India at any point.
Needs to be a citizen as per the Citizenship Act, 1955.
Minimum deposits to be made for at least 1 year to earn interest.
Interest is paid on 360 days to 1-year basis.

Documents Required to Open an FCNR Account

After passing the eligibility criteria, the following documents are necessary if a person wants to open an FCNR (Foreign Currency Non-Resident) Bank Account:

Valid passport
Passport-size photographs
Address proof (of the country the individual is currently residing in)
Indian PAN Card or Form 60
NRI Status proof
Income proof

Premature Withdrawals Under FCNR (B) Account

For premature withdrawals:

Charges are applicable to close the FCNR account prematurely, depending upon the bank
Interest will be paid as on the date of deposit if the amount is withdrawn prematurely
Interest is not paid if withdrawals are made before the completion of 1 year

Conclusion

Thus, an FCNR(B) deposit can be a helpful account for NRIs who wish to park their income as foreign currency and want it to remain unaffected by exchange rate fluctuations. After maturity, you can transfer these funds into an NRE or NRO account and directly invest in the Indian market to earn direct income from the Indian market by investing in the best investment plans for NRIs.

FAQs

Is the interest earned on FCNR(B) deposits tax-free?

Yes, the interest earned on FCNR(B) accounts is completely tax-free in India, provided that you are an NRI or PIO. No TDS is deducted on the interest accrued on your deposits.
Can a resident relative living in India operate my FCNR(B) account?

Yes, a resident relative can operate your account provided that they are a joint account holder. The resident relative can only operate the account as a power of attorney holder. Note that a resident POA can only operate the account to make local payments and cannot act as the primary account holder during the lifetime of the account holder.
Is my currency principal amount protected from currency inflation?

Yes, since the deposit amount is held in denominations of the foreign currency and the transactions and deposits are also made in the same currency, your principal amount is protected from all kinds of currency fluctuations.

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