When a citizen of India leaves, the country he/she becomes an NRI and thus he/she has to open an NRO account, an NRE account or an FCNR account. They differ in several ways and when making the choice as to which one to open. Given below are some salient features which must be noted for each option:
An NRO account can be held by anyone outside India unless they are in Nepal or Bhutan. This restriction is not placed on NRE and FCNR account holders.
2. Joint accounts
A joint account can be held with residents in an NRO account. With an NRE or FCNR account, you cannot hold a joint account with a resident; you can only hold it on a ‘former or survivor basis.
3. Currency in which account is used
An FCNR account is the exception in this case as both NRE and NRO accounts use rupees whereas an FCNR account uses Pound Sterling, US dollars, Japanese Yen, Euros, Canadian Dollars and Australian Dollars.
Repatriability is the ability to transfer money from one country to another. The main difference between an NRO account and other accounts is that an NRO account is not repatriable except under certain conditions.
5. Type of account
An FCNR is a term deposit account whereas NRO and NRE accounts are fixed deposits, savings, current as well as recurring account types.
6. Period of fixed deposits
For an FCNR account, fixed deposits have a period in between 1 and 5 years whereas with NRO and NRE accounts, fixed deposit accounts have the same conditions that apply to resident accounts.
7. Rate of interest
The rate of interest on NRE and NRO accounts are much more flexible than with FCNR accounts which have interest rate ceilings and floors.
8. Tax on interest income
It must be noted that the NRO account is the only one which has taxable income.
9. Loan amount
Only with an NRO account are there ceilings or limits on how much you can loan.
These are just some of the characteristics of an NRO account. There are many other salient features which must be noted and these features are crucial in coming to the decision of which type of bank account is best for you as an NRI in your particular situation.