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Difference Between FCNR and NRE

FCNR vs NRE

FCNR
“FCNR” stands for “foreign currency non-resident” and is a type of bank account which an NRI (non-resident Indian) can open in an authorized Indian bank.
FCNR account funds are easily and freely repatriable. Interest income of this account is not taxable in India. This account has the facility of a power of attorney; thus, the holder can operate the account in India.

Features:

This account can be opened with remittance from abroad.
A resident Indian, who is earning foreign exchange in India, can also open the account with an authorized bank but with the limit of 50 per cent of such local earnings.
Only designated currencies such as the U.S. dollar, pounds sterling, Japanese yen, or euro are required to open the account.
Conversion to another currency is only allowed at the expense of the account holder and at the prevailing rate on the day.
Only term deposits are allowed in this account.
Funds are allowed to move within the country without any extra cost.
For loans and overdraft programs the same conditions for other NRI accounts apply.
No interest is paid for periods less than six months.
Reserve Bank of India does not provide any guarantee on foreign exchange.
After a change in status of an account holder, that is, if an NRI status is changed to “resident Indian,” the account is converted to a resident rupee deposit account.

NRE
“NRE” stands for “non-resident external.” Funds as well as interest earned on this account are freely remittable out of India without permission of the RBI.

Features:

Funds in this account are maintained in Indian rupees.
Source funds for this account should be earned from abroad; funds from local sources cannot be credited to this account.
Funds in this account can be converted to any currency.
Interest earned on this account is not taxable in India.
Holder of a power of attorney can operate the account.
On return of an NRI, the account can be converted to an Indian resident account.

Summary:

1.In an FCNR account, all earnings from abroad and 50 per cent of local earnings can be credited while in an NRE account all earnings should be from abroad.
2.In FCNR accounts only a term deposit account is permissible while in an NRE account the savings account program is also available.
3.In FCNR accounts no interest is payable if the period of term deposit is less than six months while in an NRE account there is no such limit and interest is paid for the entire period.


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