RFC A/C: What Is Resident Foreign Currency Account?

After having worked abroad as an NRI (non-resident Indian), you would surely have some foreign investments such as your bank account balance, investments in shares, mutual funds, etc.

You would surely like to bring back your foreign currency from your overseas back account. After your return to India, you can open an RFC (resident foreign currency) account which can be used to credit your income from foreign sources. The below article discusses the salient features of RFC accounts for returning NRIs.

Who can open?

Any NRI, who has returned to India on or after 18 April 1992, can open an RFC account. An RFC account can also be opened by an NRI who is employed abroad and his period of stay is at least one year prior to his return to India. Thus, PIOs (person of Indian origins) or NRIs returning to settle permanently in India can open an RFC account. An RFC account can be converted to FCNR(B) (Foreign Currency Non Resident (Bank) or NRE (non resident external) accounts in case the person becomes an NRI again.

Taxes paid

No loan/overdraft is granted by banks against balances in RFC accounts. Interest rates offered on RFC account varies by term and by currency. Interest credited is taxable. However, 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.

Funds credited to RFC accounts

The entire amount of foreign exchange assets held while the NRI was resident outside India can be credited to RFC accounts. Funds such as deposits in banks outside India, investments in foreign currency, shares and securities or immovable properties situated outside India or investments in business etc outside India can be credited to RFC accounts.

Foreign exchange earnings through employment, business or vocation outside India started by the NRI while he was resident outside India. Also, all balances standing to the credit of their NRE/FCNR accounts at the time of return can be credited to RFC accounts.

Type of account

RFC accounts may be maintained in the form of current, savings (without cheque facility) or term deposit accounts and held singly or jointly only in the names of eligible persons. The term deposit accounts can be maintained for one to three years.

Foreign currencies

An RFC account is a bank account maintained in foreign currency. You can open an RFC account in any freely convertible foreign currency such as US dollars, pounds, yen, euros etc. These are foreign currencies that can be exchanged easily with other currencies and are recognized by the international market. Withdrawals in India are permitted in rupees only and are usually credited by the bank to the resident rupee bank savings account

Deposits and withdrawals

You can deposit funds from the following sources in your RFC account:

Any balances brought from your overseas bank account including foreign exchange earnings through employment, business or vocation outside India taken up or commenced while you were resident outside India.

Any foreign currency notes you bring from abroad; however, if the value of such notes exceeds $5,000 or the combined value of Travelers’ Cheques and notes exceeds $10,000, then you have to submit a Currency Declaration Form (CDF) to the customs authorities on arrival in India.

You must produce the Currency Declaration Form for endorsement by the bank when you submit the money for opening/credit to an Account.

Any foreign exchange that you get on sale of eligible assets abroad; eligible assets include bank accounts, overseas shares and securities, immoveable property and investment in business outside India.

Any income that you earn from your foreign assets such as dividends, interest.

You can transfer funds from your NRE or FCNR account into the RFC account once you become a resident Indian; in such cases, no penalty for premature withdrawal will be levied on your NRE or FCNR accounts.

Pension, superannuation etc. received from employer outside India.

Funds in RFC account can be used for following purposes:

You can use RFC funds for any remittances or investment abroad.

You can also use the funds for maintenance of dependents or any personal purposes abroad.

You can also use these funds for expenses and investments to be made in India.

Documents required for opening RFC account

The following documents are usually needed:

• 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
• Your passport photograph
• RFC declaration form

RFC to NRE

If you decide to go abroad again for a long term, you can either remit the RFC balance abroad or transfer funds from your RFC account into an NRE or FCNR (foreign currency non-repatriable) account.

Nomination

You can nominate either a resident or a non-resident for your RFC account. In case of death of the account-holder where the nominee is a resident, the balance in the RFC account will be paid to the nominee in Indian rupees. If the nominee is an NRI, such balance would be remitted abroad.