Wednesday, June 20, 2012

FCNR account

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Foreign Currency Non-Resident (FCNR) accounts

The FCNR balance lagged NRE's, another reason to free its rate. It offers only term deposits of one to five years. The money put here can be held and withdrawn in foreign currency, involving zero currency risk.

On dollar and euro-denominated deposits, FCNR accounts earn between three and four per cent, depending on the term. Similarly, on pound-denominated deposits, it pays four-five per cent.

Principal and interest earned on FCNR is freely repatriable. Interest is tax free in India but can be taxed in the resident country, depending on applicable tax norms. Loans up to ~100 lakh can be extended against funds in an FCNR.

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