Difference Between FCNR and RFC Account | FCNR vs RFC Account
Foreign Currency Non Resident (FCNR) account is a term deposit account that can be maintained by NRIs and PIOs in foreign currency whereas RFC accounts (Resident Foreign Currency) are bank accounts that can be maintained by resident Indians in foreign currency.
There are many differences between NRE account and FCNR account as listed in the following table which would help you choosing between the two:
Difference between FCNR and RFC Account
| Basis of Difference | Foreign Currency Non Resident (FCNR) | Resident Foreign Currency (RFC) | |
|---|---|---|---|
| Type of Accounts | Can be opened as Term Deposit | Vs | Can be opened as Savings Bank Deposit, Current Account, Term Deposit |
| Purpose | Opened by NRIs to park their overseas income in foreign currency in India without converting them into rupees. | Vs | Opened by NRIs who are returning to India for settling in India. |
| Source of Fund | Foreign currency notes, Travellers cheque, Currency Cheque, Wire Transfer from overseas banks or Transfer funds from an existing NRE account | 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 | Foreign Currency e.g. USD, GBP, EURO, AUD, YEN, etc. | Vs | Foreign Currency e.g. USD, GBP, EURO, AUD, YEN, etc. |
| Minimum Balance | Usually, USD 1000, GBP 500, EUR 1000, JPY 110000, AUD 1000, CAD 1000 - also varies from bannk to bank | Vs | Usually, USD 1000, GBP 500, EUR 1000, JPY 110000, AUD 1000, CAD 1000 - also varies from bannk to bank |
| Period | 1 Year to 5 Years | Vs | 1 Year to 3 Years |
| Rate of Interest | For USD - 1.5% to 2.75%, GBP- 0.5% to 1.5%, etc. depending on currency, 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 holders can be NRIs. | 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 | Principal as well as interest can be entirely repatriable | Vs | Funds can be repatriated on genuine grounds. |
| Tax Exemptions | Interest is tax-free in India. However, it would attract tax in the country of residence of the account holder. | Vs | Interest is taxable and Tax is deducted at source(TDS) as per income tax rules. |
| Currency Risk | No currency risk as the investment is made in foreign currency and is withdrawn in the same currency. | 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 |