Non resident Indians have a number of options when it come to opening accounts in India, from NRE to NRE Accounts to Resident Foreign Currency or RFC Accounts. RFC Accounts are accounts that can be opened by a Non Resident Indian (NRI) in foreign currency.
What Are the Benefits of Opening a RFC Account?
RFC Accounts help you maintain your savings in foreign currency, thus providing a hedge against forex fluctuation. You can also earn tax exemption on interest accrued on declaration of Resident but Not Ordinarily Resident status.
You can also repatriate fund for a bonafide purpose. But, the best part of an RFC account is that it becomes very useful when you are returning to India. For example, if you have balances in foreign currency abroad these RFC accounts could come in handy.
Interestingly, you can credit the full amount of foreign exchange assets acquired or held while you were resident outside India. The amount could be proceeds from a fixed deposit abroad or proceeds from shares now held in foreign currency or proceeds from real estate sold abroad etc.
Other important point to note is that if you have balances in your NRE or FCNR Accounts the same can be credited to your Resident Foreign Currency Account.
You can repatriate funds from the RFC account abroad in case of an emergency, but there has to be a valid reason for such transfer.
TDS (Tax Deducted at Source) exemption can be claimed on interest earned basis declaration of RNOR (Resident but Not Ordinarily Resident) status, if eligible, at the start of the financial year.
RFC Accounts are very useful when it comes to NRIs, especially if they plan to settle in India and need to transfer their foreign currency assets. They also comes with tax benefits and ability to repatriate money in case of an emergency. The only thing one needs to evaluate whether he would like to keep money in foreign currency or not. One cannot predict which way currencies move and sometimes keeping balances in foreign currency is advantageous while at other times it is not. In any case at least partial exposure to RFC Accounts along with NRE Accounts is a good proposition.