Difference Between NRE and RFC Account | NRE vs RFC Account
NRIs, who are willing to settle down back to India with foreign currency can manage RFC account. An 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 RFC account as listed in the following table which would help you choosing between the two:
Difference between NRE and RFC Account
Basis of Difference | Non-resident Rupee Accounts(NRE) | Non Resident Ordinary Rupee Accounts(NRO) | |
---|---|---|---|
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 abroad and would like to remit it back to India. | Vs | Opened by NRIs who are returning to India for settling in India. |
Source of Fund | Foreign funds or repatriable rupee funds | 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 Year to 5 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 holders can be NRIs residing in the same or different countries | 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 | 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 |