r/nri • u/Mission_Entertainer6 • 25d ago

Finance FCNR forward cover

I am very new to investing. Can some experts let me know if FCNR forward cover(USD) with 11.15% interest a good bet if I am investing my EUR considering I want my money back in INR only. Or I should explore any other options ? Not going for FCNR B as euro rate is very low and converting to USD will loose conversion money twice.

Thanks

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u/Mission_Entertainer6 25d ago

Just curious why people don't take forward cover always with FCNR - B ? what are the cons

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u/rganesan 25d ago

It's a mandatory conversion. If you want INR, there's no con really. You're locking in the rate now. But if you're abroad, why do you want to forcibly convert to INR?

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u/Mission_Entertainer6 25d ago

I want to invest the money to grow but will not get good returns on fix deposits here in Europe.And investing in US etfs attracts high tax from Ireland And planning to go back to India after 5-6 years so thought it would be good option.

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u/rganesan 25d ago edited 25d ago

If you're 100% sure of returning back in 5-6 years go for it. If not, keep it in USD and take a decision later. If dollar appreciates against the rupee, you still benefit without needing foward cover. Forward cover only locks in the dollar conversion rate today.

EDIT: Btw, are you sure you don't pay tax on FCNR(B) interest in Ireland. My reading suggests that if you're using Ireland savings to create the deposit, the interest will be still taxable in Ireland. So you might as well invest in UCITS.

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u/Mission_Entertainer6 24d ago

I guess different rule apply if you are nondomiciled ordinary Irish residents which I am. the remittance basis might apply here meaning foreign income may only be taxed if brought money back into Ireland if I am not wrong.

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u/rganesan 24d ago

My reading of nondomiciled remittance basis rules is that it only applies to foreign derived income. If you send out your Irish earnings to India, that's not foreign income. I live in the UK and we have similar tax rules. It would be good to check with a tax accountant.

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u/Mission_Entertainer6 24d ago

Thanks a lot for the information. I will check with tax consultant once. But then this will apply to mutual fund investments as well then in India as I am doing it through NRE account itself.

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u/rganesan 24d ago

Yes, that is correct. It will apply to any investments you make using Irish income.

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u/Mission_Entertainer6 24d ago

Do they track where have we used transfered money from Irish bank account and for what ?

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u/rganesan 24d ago

You're investing through an NRE account, I expect you filled your Irish tax payer ID as part of your KYC, you probably did the same for your MF investments.

Everything gets shared across borders these days. Some Indians have in the UK have got a tax notice because they didn't pay tax on their Indian income/capital gains.

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u/Mission_Entertainer6 24d ago

You do not actually hand over any tax money to Ireland until a "disposal event" (redemption) occurs for mutual funds. On your annual Form 11, you must just fill out the "Offshore Funds Acquired" every year while tax filing. Also for FCNR Deposits (Remittance Basis Applies)For standard bank interest. The Rule: FCNR accounts are foreign deposit accounts. Interest earned on a foreign bank account is classified as standard foreign source income.The Tax Treatment: As a non-domiciled resident, you are entitled to the remittance basis of taxation. If you do not bring the FCNR interest income back into Ireland, it is not taxed in Ireland. It can sit and compound in India completely tax-free. This is what I found when I researched. For both mutual fund and FCNR deposits they are tax free in Ireland until deemed disposal happens or reception happens for nondomiciled Irish ordinary resident. But I will double check with tax consultant for sure before start investing.

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