Difference Between NRO and RFC Account | NRO vs RFC Account
An NRO (Non-Resident Ordinary) account is maintained and managed by resident Indian who becomes non resident indian whereas RFC accounts (Resident Foreign Currency) are bank accounts that can be maintained by resident Indians in foreign currency, who are willing to settle down back to India.
There are many differences between NRO account and RFC account as listed in the following table which would help you choosing between the two:
Difference between NRO and RFC Account
Basis of Difference | Non-Resident Ordinary(NRO) | Resident Foreign Currency (RFC) | |
---|---|---|---|
Type of Accounts | Can be opened as Savings Bank Deposit, Current Account, Term Deposit | Vs | Can be opened as Savings Bank Deposit, Current Account, Term Deposit |
Purpose | Opened by NRIs who earn income in India like income from rent from real estate properties in their names or pension etc. | Vs | Opened by NRIs who are returning to India for settling in India. |
Source of Fund | Local rupee earnings. Existing domestic account of the residents can be converted to NRO account on their taking up employment/ business/immigration abroad. | Vs | Foreign exchange earnings through employment or business, deposits held in banks abroad, investments in foreign currency or immovable properties situated outside India, balances held in his FCNR or NRE accounts |
Maintained in | Indian Rupee | Vs | Foreign Currency e.g. USD, GBP, EURO, AUD, YEN, etc. |
Minimum Balance | Usually, Savings : Rs. 10,000, Term / Fixed Deposit: Rs. 50,000 | Vs | Usually, USD 1000, GBP 500, EUR 1000, JPY 110000, AUD 1000, CAD 1000 - also varies from bannk to bank |
Period | 1 Month to 10 Years | Vs | 1 Year to 3 Years |
Rate of Interest | 7% to 9% depending on amount, period and bank | Vs | For USD - 1.5% to 2.75%, GBP- 0.5% to 1.5%, etc. depending on currency, period and bank |
Joint Holding | Allowed. Joint holder can be resident Indians | Vs | Allowed. Joint holder can be any other person eligible to open RFC account |
Nomination | Allowed. Nominees can be Indian Residents/NRIs | Vs | Allowed. Nominees can be Indian Residents/NRIs |
Repatriability | Principle is not repatriable but current income and interest earning net of taxes is repatriable. | Vs | Funds can be repatriated on genuine grounds. |
Tax Exemptions | Interest is taxable. Tax is deducted at source(TDS) at 30% plus surcharge and cess | Vs | Interest is taxable and Tax is deducted at source(TDS) as per income tax rules. |
Currency Risk | Currency risk is there, there will be a loss in case rupee depreciates further at time of maturity and repatriation. | Vs | No currency risk as the investment is made in foreign currency and is withdrawn in the same currency. |
Loan against this account | Permitted | Vs | Not granted |