What are the risks of leveraged FCNR deposits? A complete guide for NRIs

Leveraged FCNR deposits involve using an FCNR deposit as collateral for a loan in rupees.

If an NRI switches to resident status, the loan may need to be closed early and the FCNR deposit prematurely broken.

Upon early closure, the entire FCNR interest becomes taxable without deducting the interest paid on the loan.

This can lead to an unexpected tax liability, reducing or eliminating the benefit of the deposit and loan strategy.