FCNR(B) Deposits Explained: Permissible Currencies, 1-to-5-Year Tenor and Zero Exchange Risk for NRIs

An FCNR(B) deposit is the only interest-bearing account an NRI can hold in India that never touches the rupee. Short for Foreign Currency Non-Resident (Bank), it is a term deposit maintained in a permissible foreign currency, governed by the Reserve Bank of India's FED Master Direction No. 14/2015-16 issued under the Foreign Exchange Management (Deposit) Regulations, 2016 (FEMA 5(R)/2016-RB), last updated 29 June 2026. Because the principal is booked in dollars, pounds or another convertible currency rather than converted to rupees, the depositor carries zero rupee exchange risk over the life of the deposit.

That single feature separates FCNR(B) from every other NRI deposit. An NRE savings or fixed deposit is held in rupees, so a falling rupee erodes its dollar value at maturity; an FCNR(B) deposit denominated in US dollars returns exactly the same number of dollars, plus contracted interest, regardless of where USD/INR sits on the maturity date. This guide sets out the FEMA basis, the Indian and foreign tax treatment, and the repatriation mechanics an NRI must understand before locking money in for the permitted one-to-five-year window.

FEMA / DTAA Position

The FCNR(B) scheme sits squarely inside the Foreign Exchange Management (Deposit) Regulations, 2016, notified as FEMA 5(R)/2016-RB and administered through RBI Master Direction No. 14/2015-16. The regulations permit only Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) to open the account, and only as a term deposit. There is no savings or current variant of FCNR(B); the money must be locked for a fixed tenor of a minimum of one year and a maximum of five years, as set out in the RBI Master Direction on Deposits and Accounts.

The deposit may be accepted in any permissible foreign currency, meaning a freely convertible currency in which Indian banks are authorised to accept deposits. In practice the currencies commonly offered are the US dollar, pound sterling, euro, Japanese yen, Canadian dollar and Australian dollar, though the Master Direction does not restrict the account to a fixed statutory list. Interest ceilings on these deposits are themselves capped by the RBI through a formula linked to comparable overnight benchmark rates, which is why FCNR(B) rates differ across currencies for the same tenor.

On the treaty side, the Double Taxation Avoidance Agreement (DTAA) position is unusual and often misread. Because India already exempts FCNR(B) interest from tax while the holder is non-resident (covered in the next section), the interest article of the relevant DTAA rarely bites on the Indian side at all. The DTAA interest rate matters chiefly for the country of residence and for any Indian-source income the NRI holds outside the FCNR(B) shell, such as dividends or capital gains. A critical caution for NRIs: no Indian DTAA treats capital gains on Indian securities as fully exempt. India retains the right to tax long-term capital gains at 12.5%, so treaty planning cannot make that liability disappear.

The India-USA treaty has been in force since 12 September 1991, the India-UK treaty since 26 October 1993, and the India-UAE treaty since 22 September 1993. These interest rates apply to Indian-source interest that is not otherwise exempt; they do not override the domestic Section 10(15) exemption that FCNR(B) interest enjoys.

Tax Treatment in India

Interest earned on an FCNR(B) deposit is exempt from Indian income tax so long as the account holder qualifies as a non-resident, or as a Resident but Not Ordinarily Resident (RNOR), under the Income Tax Act, 1961. The exemption flows from Section 10(15)(iv)(fa) of the Income Tax Act, 1961, which shields interest payable by a scheduled bank to a non-resident or RNOR person on deposits held in foreign currency. Because the income is exempt at source, no tax is deducted: there is no TDS on FCNR(B) interest while the holder remains non-resident.

That treatment stands in sharp contrast to the Non-Resident Ordinary (NRO) account. Interest on an NRO deposit is fully taxable in India and suffers tax deducted at source under Section 195 at 30%, before surcharge and the 4% health and education cess, unless a lower DTAA rate is claimed with a Tax Residency Certificate. An NRI weighing where to park funds should model both routes; the NRI income tax calculator at /calculators/nri/nri-tax and the repatriation calculator at /calculators/nri/repatriation help quantify the after-tax gap between an exempt FCNR(B) deposit and a taxable NRO fixed deposit.

The exemption is tied strictly to residential status, not to the account label. The moment the holder returns to India permanently and becomes an ordinarily resident, the Section 10(15)(iv)(fa) shelter falls away, though RBI rules allow the deposit to run to maturity at the contracted rate. From that point the interest becomes taxable at the individual's slab rate. For high earners, the surcharge structure then matters: the new tax regime caps the surcharge at 25% of base tax for incomes above Rs 5 crore, in contrast to the 37% top rate that used to apply, while the Section 87A rebate under the new regime for FY 2025-26 is Rs 60,000 for total income up to Rs 12 lakh.

Rental income, capital gains and other Indian-source receipts remain taxable regardless of how the FCNR(B) interest is treated; NRIs earning rent should separately model that liability using the rental income tax calculator at /calculators/nri/rental-income-tax. For the statutory language, readers can consult the glossary entry on FCNR deposits and the entry explaining TDS under Section 195.

Tax Treatment Abroad

India exempting the interest does not make an FCNR(B) deposit tax-free everywhere. Most residence countries tax their residents on worldwide income, so the same interest that escapes Indian tax under Section 10(15)(iv)(fa) is usually reportable abroad. The foreign-tax-credit mechanism that normally prevents double taxation offers no relief here for a simple reason: there is no Indian tax paid on the interest, so there is nothing to credit against the foreign liability.

For an NRI resident in the United States, FCNR(B) interest is ordinary income taxable at the applicable federal rate, and it must be reported along with the foreign account itself under FBAR and FATCA thresholds. Because India levies no tax on that interest, the US resident cannot claim a foreign tax credit against it and pays the full domestic rate. A UK-resident NRI faces a similar arising-basis charge, with the interest taxable at the relevant savings rate; the India-UK DTAA in force since 26 October 1993 does not exempt it, since the treaty's foreign-tax-credit article only relieves tax actually suffered in India.

The United Arab Emirates is the notable outlier. The UAE levies no personal income tax on individuals, so an NRI resident there pays nothing on FCNR(B) interest at either end: India exempts it and the UAE does not tax personal savings income. That combination is what makes FCNR(B) deposits especially popular among Gulf-based NRIs, though the India-UAE treaty benefit on other Indian income still requires a valid Tax Residency Certificate with UAE establishment proof.

The practical lesson is that an NRI must plan around the residence country, not just India. A deposit that looks tax-free from Mumbai can carry a full domestic charge in New York or London, and only genuinely no-tax jurisdictions such as the UAE deliver an end-to-end exempt outcome. For the treaty mechanics behind these outcomes, the glossary entry on DTAA sets out how the relief articles operate.

Repatriation Mechanics

Repatriation is where FCNR(B) shows its second structural advantage. Under FEMA 5(R)/2016-RB, both the principal and the interest on an FCNR(B) deposit are fully and freely repatriable, without any monetary ceiling and without prior RBI approval. Since the money never left foreign currency, sending it back abroad on maturity involves no conversion and no exchange loss; the bank simply remits the same currency it holds.

The NRE account shares this fully repatriable character, but only in rupee terms, so a maturing NRE deposit must be converted to foreign currency at the prevailing rate before it can be sent out. The NRO account is the restricted one. Balances in an NRO account, representing Indian-source income such as rent, pension and dividends, are repatriable only up to USD 1 million per financial year, and each remittance requires the account holder to file Form 15CA, supported by a chartered accountant's Form 15CB certifying that the applicable Indian tax has been paid. NRIs planning larger transfers should map the sequence with the repatriation calculator at /calculators/nri/repatriation.

Because FCNR(B) principal and interest sit outside that USD 1 million cap, the account is often used as a staging vehicle: funds earned abroad are held in FCNR(B) during the NRI years, exempt from Indian tax and freely movable, and only converted to rupees if and when the holder chooses. On a change of residential status to resident, RBI permits the existing FCNR(B) deposit to continue until maturity, after which the proceeds are typically credited to a Resident Foreign Currency (RFC) account, preserving foreign-currency form for a returning NRI. The glossary entry on NRO accounts details the funding and repatriation rules that make the FCNR(B) route attractive by comparison.

FAQ

Which currencies can an FCNR(B) deposit be held in?

Any permissible freely convertible foreign currency in which Indian banks are authorised to accept deposits. The currencies commonly offered are the US dollar, pound sterling, euro, Japanese yen, Canadian dollar and Australian dollar, though RBI's Master Direction No. 14/2015-16 does not fix a closed statutory list. The exact menu depends on the bank.

What is the minimum and maximum tenor of an FCNR(B) deposit?

Under FEMA 5(R)/2016-RB, an FCNR(B) deposit must be held for a minimum of one year and a maximum of five years. It exists only as a term deposit, so there is no savings-account or on-demand version of FCNR(B).

Is FCNR(B) interest taxable in India?

No, not while the holder is non-resident or RNOR. Section 10(15)(iv)(fa) of the Income Tax Act, 1961 exempts interest paid by a scheduled bank to such persons on foreign-currency deposits, and no TDS is deducted. The exemption ends when the holder becomes an ordinarily resident individual, after which the interest is taxable at slab rates.

Do I bear any exchange-rate risk on an FCNR(B) deposit?

No. The principal is booked and repaid in the original foreign currency, so a fall in the rupee does not reduce your dollar or pound value. This zero rupee exchange risk is the defining feature that separates FCNR(B) from a rupee-denominated NRE deposit.

Can I repatriate the full FCNR(B) balance abroad?

Yes. Both principal and interest are fully repatriable without any ceiling, unlike an NRO account, where repatriation is capped at USD 1 million per financial year and requires Form 15CA and Form 15CB. No prior RBI approval is needed for FCNR(B) remittances.

Will my country of residence tax the interest even though India does not?

Usually yes. Countries that tax worldwide income, such as the United States and the United Kingdom, tax FCNR(B) interest at their domestic rates, and because India levies no tax there is no foreign tax credit to offset it. The United Arab Emirates, which has no personal income tax, is the main exception where the interest stays untaxed at both ends.

What happens to my FCNR(B) deposit when I return to India for good?

RBI allows the deposit to run to its contracted maturity even after your status changes to resident. From the date you become resident, the interest ceases to be exempt under Section 10(15)(iv)(fa) and becomes taxable, and on maturity the proceeds are usually moved into a Resident Foreign Currency (RFC) account to keep them in foreign-currency form.