RFC account: For NRIs planning to return to India

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RFC account: For NRIs planning to return to India
Resident foreign currency or RFC accounts are bank accounts that enable resident Indians to maintain accounts in foreign currency. Such accounts are primarily advantageous for Non Resident Indians (NRIs) planning to come back to India as they would be able to retain their fortunes earned in foreign currency in RFC account. Below are certain specific attributes of this account with respect to returning NRIs.

Who is eligible to open RFC account?

Any resident Indian can open and maintain the RFC account in any freely convertible foreign currency. Also, NRIs who after residing for a continuous term of 1 year or more in a foreign nation have returned back to India are also eligible to open a RFC account in foreign currency. Authorized dealers or banks can assist in the opening of a RFC account. Else, existing NRE or FCNR account can also be converted into a RFC account at the discretion of the account holder.

In which foreign currencies RFC account can be maintained?

RFC account can be maintained in any of the freely convertible foreign currency that is recognized in the international markets. So, a person can open RFC account with funds in multiple foreign currencies such as AUD, CAD, Euro, GBP, JPY, USD etc.

What is the interest rates offered on RFC account?

Interest rate offered on RFC account, which can be held as either term deposit, current or savings account, varies according to the term and currency. At present, the rate of interest offered on a RFC term deposit of over 1 year maintained in US dollar is in the range of 2.5%-3.5%.

What is the tax implication on interest credited in RFC account?

Interest credited on a quarterly basis on the balance fund in the RFC account is taxable. However, in a case, when the account holder is a Resident but does not qualify as an Ordinary Resident then he is exempt from tax payment for the interest earned on the RFC account.

What funds can be deposited in the RFC account?

All such sources of funds that can be deposited in the RFC account are provided here below:

1. Balance amount in foreign bank account that includes funds in foreign currency earned through conduct of some business in the foreign nation or by way of employment.

2. Superannuation, pension etc. received by the NRI from an employer abroad.

3. Foreign exchange received on account of sale of assets including shares, bank account, immovable property and investments held by the individual outside India.

4. Any income earned from assets held abroad such as interest income and dividend.

5. On becoming a resident Indian, funds from FCNR or NRE account can be deposited in the RFC account and in such a case no penalty would be levied on premature withdrawal of FCNR or NRE account.

6. Foreign currency notes brought from a foreign nation. Nevertheless, in a case when the valuation of such   foreign currency notes is more than $5000 or the total value of notes and Traveler's cheques is over $10,000 then Currency Declaration Form (CDF) is to be submitted to the customs authorities. The form is also to be produced in front of the banking authorities for endorsement while depositing money at the time of opening or making a credit to the RFC account.

For what purposes RFC account balance be used?

The balance amount in RFC account can be used for investments or remittances abroad. The funds can also be used for payments and investments in India and in this case the amount is converted into Indian rupee.


Read more about: nris, rfc account, resident indians, nre, nro, fcnr
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