Interest rates on US dollar deposits in FCNR(B) accounts in India have traditionally been around 2-3%. However, after the rate hike in the US, they have risen sharply after coming closer to the banks’ offer on rupee deposits. FCNR(B) account enables Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to deposit their savings in fixed deposits with Indian banks and earn interest thereon. Since the principal and interest are denominated in the currency in which the account is held, there is no loss of exchange, and the accounts are protected from foreign exchange rate risks.
“With the restrictions on interest rates on FCNR (B) accounts being temporarily lifted, the interest on these accounts will be much higher than their overseas earnings. In addition, the interest earned from these accounts is exempted from income tax in India,” said Adil Shetty, CEO, bankbazaar.com.
He further said, “The interest rate on domestic fixed deposits is only 1-1.5 per cent higher than the FCNR rates. In addition, they are also taxable. TDS is deducted, and returns are taxed as per the tax bracket of the depositor. Given the volatile foreign exchange position, currency conversion costs and taxes, the returns from investing in an FCNR(B) account can be at par with the domestic fixed deposit returns.
Latest FCNR Deposit Interest Rates (USD) 2022
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Source: Mint Research
Note: Data taken from the respective bank websites, The highest interest rates (% p.a.) offered by the selected banks for the respective tenures are shown in the table; 1 year to banks, 2 to 3. is listed on the basis of interest rate offered for years and 5 years; Interest on deposits up to USD 1 million.
FCNR Account: An NRI who wishes to maintain an FD account in India can opt for an FCNR (Foreign Currency Non-Resident) account. The account allows you to save money earned abroad in foreign currency. This is a fixed deposit account in India for an NRI. Such fixed deposit account can be maintained in multiple foreign currencies.
For example, you have a USD, GBP, EUR, etc., fixed deposit account with tenures ranging from 1 to 5 years. In such an account you get interest in foreign currency. And also, income is not taxable in India. The principal amount and the interest received on the deposit are fully repatriable. However, unlike regular Indian or domestic fixed deposits, where you have deposits ranging from 7 days to 10 years in FCNR deposits, you need to hold the deposit for a minimum period of 1 year.
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