What is an FCNR Account?

The FCNR full form is Foreign Currency Non-Resident Account. It is an account that is similar to the fixed deposit accounts made for the NRIs or the PIOs. It allows them to hold the funds in foreign currency in India without converting them. These FCNR account was known as FCNR (A) accounts, but then it was replaced by the FCNR (B) accounts. The FCNR (A) scheme was withdrawn because of its quasi-fiscal costs to the government. There was also the foreign exchange risk borne by the government of India and the RBI. These accounts are denominated in different countries' currencies, such as:

• Euro (EUR)

• US Dollars (USD)
• Canadian Dollars (CAD)
• Australian Dollars (AUD)
• British Pound (GBP)
• Japanese Yen (JPY)
• Swedish Krona (SEK)
• Danish Krone (DKK)
• Swiss Francs (CHF)

There are many benefits of the FCNR accounts, such as tax exemption on the funds and the interest earned on them, etc. These accounts can be opened jointly and held by two or more persons. 

What are the Benefits of an FCNR (B) Account

1. Higher Returns: There are higher returns on the FCNR accounts, which makes them a good option for investment. They provide better returns on the foreign investment as compared to what people might receive in the country where they are currently residing. 

2. Risk Mitigation: Since you will be investing in foreign currencies, you don't have to worry about the exchange rates and can protect yourself from their volatility. This decreases the risk of losing the earning values in other currencies. 

3. Tax Exemption: One of the best benefits of the FCNR (B) accounts is that all the interest you earn on your funds will be tax-free in India. It means you can have the whole principal amount and the interest earned on it by your side. 

4. Diversification: For people who earn in different currencies or have business or work in different countries, FCNR accounts provide diversification, which is a great benefit. 

5. Denominations: As you already know, FCNR accounts are denominated in several currencies, so you can choose in which currency you want to save your overseas income.