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What Is The RFC – Resident Foreign Currency Account Scheme?

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We have already discussed about different types of NRI bank accounts which an NRI can maintain and operate while having a NRI status. Here is another bank account for NRIs which they can open after returning for permanent settlement in India.

What Is RFC Bank Account?

RFC stands for Resident Foreign Currency, as name suggest this account is meant for resident Indians for maintaining there foreign currencies. Anyone returning back to India for uncertain period or for permanent settlement can open this account for keeping his foreign currency.

As per the law, once back in India you are not allowed to continue your NRI bank accounts like NRE, NRO or FCNR i.e you need to get your NRI bank account converted into normal saving account. But if you do not want to convert your foreign currency immediately you can open a RFC account and transfer all your foreign currency from other NRI accounts to RFC account to maintain your foreign currency.

Who Are Eligible To Open RFC Account?

NRI/PIO are eligible to open RFC account if you fulfill following conditions:-

  • You are an NRI who has returned to India on or after 18th April, 1992
  • You were resident outside India for a continuous period of not less than 1 year prior to your return
  • You have been permanently settled in India since your return
  • You need get approval from RBI, if have returned from abroad in less than one year and want to open RFC account.

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What Can Be The Source Of Money Into RFC Account?
  • Bank account balance and interest thereon.
  • Amount earned (Dividend / Interest / profit) on investments in foreign currency in the form of shares or securities.
  • Rent etc. earned from Immovable property outside India.
  • Foreign exchange earning through employment, business etc. from outside India.
  • The amount of foreign exchange in your NRE and FCNR accounts at the time of return.
  • Pension or any other monetary benefits from your employer outside India.
  • Amount of foreign exchange received from the sale proceeds of assets abroad.
  • Money received or acquired as gift or inheritance.
  • Amount received as the proceeds of life insurance policy claims/maturity/ surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority.
What Are The Benefits Of Having A RFC Account?
    • To keep your foreign currency earnings in your bank account without converting into INR
    • Exchange Rate :- No need to convert foreign currency into domestic currency and save yourself from exchange rate risk.
    • Withdraw cash in Rupees
    • Tax Exemption :- Interest income from RFC account is exempt from income tax till the Returning Indian maintain the status of Resident but Not Ordinarily Resident (RNOR). Once the NRI loses RNOR (resident not ordinarily resident) status and becomes an ordinary resident the interest income becomes taxable.
    • Change Of Residential Status :- In case of regaining NRI status, account holder can either transfer the RFC balance abroad or can transfer the balance amount to his NRE/NRO .
    • Unrestricted utilization :- The account holder of RFC accounts can freely utilize the foreign currency balances including investment in any form outside India.
    • Repatriate funds for bonafide purpose :- RFC account holder is allowed to make bonafide remittances overseas without any prior approval. Which means you are allowed to make any genuine transaction either for yourself or for your dependent overseas and in India without any approval like travel expenses for going abroad, children’s education abroad etc..
    • Avail of the nomination facility : – Under this facility the amount of funds available in the RFC account can be remitted abroad in case of nominee residing abroad and in case of nominee residing in India the equivalent amount will be paid in Indian rupees on the death of account holder.

 

What All Currencies Are Allowed To Be Maintained In A RFC Accounts?

RFC accounts can be maintained in four global currencies US Dollar (USD), Pound Sterling (GBP), and EURO in the form of Savings / Term Deposit.

Is RFC Account Holder (Returning Indian) Allowed To Keep Movable And Immovable Assets Abroad?

The provisions relating to assets of returning Indians are governed by FEMA, 1999 as:

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Movable Assets Abroad: Foreign exchange assets such as  Bank accounts, stocks and securities, Life insurance policies, Loans, company deposits, debentures, bonds etc., acquired, held or owned by NRI while he was abroad can be held and owned even after the NRI returns to India for permanent settlement. Such balances can be utilized for reinvestment and can be repatriated to India at any time.
Immovable Assets Abroad: NRIs can continue to hold their immovable properties outside India, such properties can be rented out, rentals can be credited to overseas bank accounts. Such properties can be sold/transferred and the sale proceeds credited to overseas bank accounts. Expenses relating to such properties, such as maintenance, insurance premium etc. can be paid out of the overseas balances.

What Are The Documents Required To Open A RFC Account In India?
  • Photocopy of the pages containing passport details and personal details of all applicants
  • Copy of valid visa and immigration stamps showing evidence of foreign stay for at least 1 year
  • Passport size photograph
  • RFC declaration form
Can RFC Accounts Be Opened Jointly?

Yes RFC account can be opened jointly with another person eligible to open RFC account.

For How Long Can An RFC Accounts be held?

RFC accounts can be held till the status of resident not ordinarily resident (RNOR) is held.

Is There Any Minimum Fund Limit For Opening An RFC Account?

Yes, there is a minimum limit of funds required to open a RFC account. You can with your bank as it may vary from bank to bank.

Points To Remember
  • Immediately on return to India, NRIs should inform their Bankers and the Bankers will designate their accounts as Resident accounts or transfer the balance in their NRE/FCNR accounts to RFC accounts if so desired. FCNR accounts can be continued till the date of maturity and on maturity can be converted to RFC accounts.
  • No loan is available against RFC account.

2 comments

  1. I am planning to return to India. I have Insurance policies from companies abroad for which money back and pension amounts are due. Can this be credited to rfc account.

    Thanks
    Ravi

    • Pension or other monetary benefits received from outside India in convertible foreign currency, through normal banking channels, arising out of employment taken up outside India by the eligible person prior to his returning to India may be allowed in RFC Accounts by authorised dealers.

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