FCNR(B) deposits for NRIs: hold your savings in dollars, dodge rupee risk, and repatriate freely

An NRI who parks savings in a rupee fixed deposit carries two risks at once: the credit risk of the bank and the currency risk of the rupee. The Foreign Currency Non-Resident (Bank) account, universally shortened to FCNR(B), removes the second of those risks entirely. Governed by the Reserve Bank of India's FED Master Direction No. 14/2015-16 on Deposits and Accounts, the FCNR(B) is the only Indian deposit that lets a non-resident hold the whole balance in a permitted foreign currency such as US dollars, pounds sterling or euros, so a fall in the rupee never erodes the maturity value.

That single design choice is what makes the product distinct from the rupee-denominated NRE and NRO accounts. Under the same Master Direction, an FCNR(B) may be opened only as a term (fixed) deposit, never as a savings or current account, and both principal and interest are fully repatriable without any per-year ceiling. This article sets out the FEMA basis, the Indian and foreign tax treatment, and the repatriation mechanics an NRI needs before wiring money into one. You can model a maturity value first with our FCNR Deposit Calculator.

FEMA / DTAA Position

The right to hold and maintain an FCNR(B) flows from Section 6 of the Foreign Exchange Management Act 1999, which permits capital-account transactions only where the RBI has specifically allowed them. FCNR(B) accounts are one such permitted class: RBI's Master Direction No. 14/2015-16 states that they may be opened and maintained by Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) as term deposits denominated in any permitted foreign currency. A resident Indian, by contrast, may only remit up to USD 250,000 per financial year under the Liberalised Remittance Scheme, a separate route explained in our note on the USD 250,000 LRS limit.

Funding is tightly channelled. Per the Master Direction, an FCNR(B) can be credited only through inward remittance from outside India via normal banking channels, or by transfer from the depositor's existing NRE or FCNR account. Local rupee funds sitting in an NRO account cannot flow directly into an FCNR(B) without first satisfying the NRO repatriation rules. Because the deposit is held in foreign currency throughout its tenure, the depositor is insulated from rupee exchange-rate movement, which is the core reason the product is marketed as a hedge rather than a yield play.

Interest rates on FCNR(B) deposits are not freely set by banks. RBI prescribes ceilings referenced to an overnight benchmark rate for the respective currency, and individual banks price within those ceilings. This is a deliberately conservative structure: the RBI repo rate itself stood at 5.25% following the Monetary Policy Committee's hold on 8 April 2026, and foreign-currency deposit ceilings track international, not domestic, benchmarks. For NRIs weighing a rupee alternative, our NRE FD Calculator shows the rupee-yield side of the same decision.

Double Taxation Avoidance Agreements (DTAAs) sit alongside FEMA rather than replacing it. A DTAA governs how interest, dividends and capital gains are taxed between India and the country of residence; it does not authorise the account itself. The interplay matters most for the tax analysis below, because Section 90(2) of the Income-tax Act 1961 lets a non-resident apply whichever of the domestic law or the treaty is more beneficial.

Tax Treatment in India

Here the FCNR(B) delivers its second advantage. Interest earned on an FCNR(B) deposit is exempt from Indian income tax under Section 10(15)(iv)(fa) of the Income-tax Act 1961, for so long as the depositor qualifies as a person resident outside India under FEMA. Because the interest is exempt at source, banks apply no tax deducted at source (TDS) on it, unlike ordinary domestic fixed deposits. The exemption is verifiable in the bare Act text hosted at indiacode.nic.in.

That exemption is narrower than it first appears, and the boundary is a residency test, not an account test. The moment the depositor returns to India for good and becomes a "resident" under FEMA, the shelter of Section 10(15)(iv)(fa) falls away and the interest becomes taxable in the ordinary way. This is why returning NRIs are usually advised to let existing FCNR(B) deposits run to maturity, since the RBI Master Direction permits banks to continue an FCNR(B) until its contracted maturity even after the holder's status changes, while any fresh Indian tax liability is assessed under the slabs that apply from the year of return.

Other income an NRI earns in India does not enjoy the FCNR shelter and is taxed normally. Long-term capital gains on listed equity are taxed at 12.5% beyond the annual exemption of Rs 1,25,000 following Budget 2024, and short-term gains on the same at 20%. A surcharge then applies on the tax: 10% for total income between Rs 50 lakh and Rs 1 crore, 15% from Rs 1 crore to Rs 2 crore, and 25% above Rs 2 crore, with a health and education cess of 4% on top. Estimate your own position with the NRI Tax Calculator.

Where TDS does bite, it bites hard for non-residents. Section 195 of the Income-tax Act 1961 requires the payer to withhold tax on sums paid to a non-resident at the rate in force, but the same section read with Section 90 allows withholding at the lower of the Act rate or the applicable DTAA rate, provided the NRI furnishes a valid Tax Residency Certificate and Form 10F. The following table sets out the residual heads of income and how they are treated.

Tax Treatment Abroad

An FCNR(B) that is tax-free in India is rarely tax-free everywhere. Most countries tax their residents on worldwide income, so the interest India chooses not to tax will typically be picked up by the country where the NRI is resident. A US person, for example, reports FCNR(B) interest on their Form 1040 because the United States taxes citizens and green-card holders on global income, and the India-US DTAA effective from 12 September 1991 does not override that domestic reach.

The foreign-tax-credit mechanism only helps where tax has actually been paid in India. Since FCNR(B) interest suffers zero Indian tax under Section 10(15)(iv)(fa), there is no Indian tax to credit against the foreign liability, and the resident country collects its full domestic rate on that interest. Article 24 of the India-US treaty, and equivalent articles in other treaties, grant relief only for taxes "paid" in the source state, which is nil here.

The DTAA rates below matter for the NRI's other Indian income rather than for FCNR interest, because Section 90(2) already secures the more beneficial 0% domestic outcome on the deposit itself. They become decisive for dividends and capital gains routed through India, where the treaty caps what India may charge at source.

Two cautions follow from that table. First, capital gains are never "exempt" under these treaties: India retains the right to tax listed long-term gains at 12.5%, and the India-UAE treaty expressly notes that gains on shares of an Indian company remain taxable in India. Second, UAE residents must hold a Tax Residency Certificate backed by proof of a UAE establishment before claiming the 12.5% interest cap, per the treaty notes. Model the credit interaction with our Foreign Tax Credit Calculator and read the mechanics in the DTAA glossary entry.

Repatriation Mechanics

Repatriation is where the FCNR(B) is most generous. Under RBI's Master Direction No. 14/2015-16, both the principal and the interest of an FCNR(B) deposit are fully and freely repatriable, with no annual dollar ceiling and no requirement for a chartered accountant's certificate on the deposit proceeds themselves. Money can therefore return to the country of residence in the same foreign currency it was held in, closing the loop the account was designed to serve.

This freedom is the sharpest contrast with the NRO account. An NRO balance is repatriable only up to USD 1 million per financial year, and that outward remittance requires Forms 15CA and 15CB certifying that Indian taxes have been paid, as explained in our guide to the one-million-dollar NRO rule. The FCNR(B), by design, sits above that cap because the funds entered India through banking channels in the first place and never lost their foreign-currency character.

Movement between the three account types follows one-way logic under FEMA. Funds can flow freely from an NRO account to an NRE or FCNR(B) account only within the USD 1 million per-year window and after tax certification, whereas the reverse transfer from NRE or FCNR into NRO is unrestricted. Our Repatriation Calculator sequences these transfers so an NRI does not accidentally breach the annual cap.

On maturity, the depositor has three clean choices under the Master Direction: repatriate the proceeds abroad, renew the FCNR(B) for a further term, or convert to an NRE or resident account depending on FEMA status at that date. Because the whole balance stayed in foreign currency, the rupee's level on the maturity date is irrelevant to the dollar sum received, which is precisely the outcome an NRI reaching for an FCNR(B) is buying. For a side-by-side of all three accounts, see our comparison of NRE vs NRO vs FCNR(B).

FAQ

Is FCNR(B) interest really tax-free in India?

Yes, while the depositor remains a person resident outside India. The exemption is granted by Section 10(15)(iv)(fa) of the Income-tax Act 1961, and because the income is exempt, banks deduct no TDS on FCNR(B) interest. The shelter ends when the holder becomes an Indian resident under FEMA.

In which currencies can I open an FCNR(B) deposit?

RBI's Master Direction No. 14/2015-16 permits FCNR(B) deposits in any permitted foreign currency, which in practice includes major currencies such as US dollars, pounds sterling, euros, Japanese yen, Canadian dollars and Australian dollars, depending on what the bank offers. The deposit must be a term deposit; savings and current variants are not allowed.

Can I fund an FCNR(B) from my NRO account?

Not directly. Under the Master Direction, an FCNR(B) is funded by inward remittance from abroad or by transfer from an existing NRE or FCNR account. NRO funds must first satisfy the USD 1 million per financial year repatriation limit and the Form 15CA/15CB certification before they can be routed onward.

Is there any limit on repatriating FCNR(B) proceeds?

No. Both principal and interest of an FCNR(B) are fully repatriable without any annual ceiling, per RBI's Master Direction No. 14/2015-16. This is the key structural advantage over an NRO account, whose repatriation is capped at USD 1 million per financial year.

Do I still pay tax in my country of residence?

Almost always, yes. Countries that tax worldwide income, such as the United States under its citizenship-based system, will tax FCNR(B) interest even though India does not. Because no Indian tax is paid on the interest, no foreign tax credit arises against it under treaty articles like Article 24 of the India-US DTAA effective 12 September 1991.

What happens to my FCNR(B) when I return to India permanently?

The RBI Master Direction lets banks run an existing FCNR(B) to its contracted maturity even after your status changes to resident. However, the Section 10(15)(iv)(fa) tax exemption stops from the date you become a FEMA resident, so interest accruing after that point becomes taxable under the slabs applicable from your year of return.

How does an FCNR(B) compare with an NRE fixed deposit?

Both pay tax-free interest while you are non-resident and both are fully repatriable, but an NRE FD is held in rupees and therefore carries currency risk, whereas an FCNR(B) is held in foreign currency and does not. Compare the two yields directly using the NRE FD Calculator and the FCNR Deposit Calculator.