Retaining foreign currency with RFC accounts

In case you are a Non Resident Indian (NRI) who is planning to relocate back to India, maintaining your foreign currency accounts can be a tough ask. However, there is not much to worry, if you are familiar with Reserve Foreign Currency (RFC) accounts.Retaining foreign currency with RFC accounts

Such accounts are designed especially for the NRIs who are planning to move back to their motherland, but intend to hold on to their foreign currency funds. With RFC accounts, they can transfer these funds to India from their overseas bank accounts.

Opening an RFC account

Anyone who plans to make a comeback to the country of his birth, after spending or working for a time period of one or more years, automatically qualifies for an RFC account. It’s not at all tough to get an RFC account opened in your name.

You can contact a bank or any authorized dealer for the purpose, and you would be comprehensively guided about the formalities involved. The account can be easily opened with any of the freely converted currencies such as AUD, CAD, USD, Euro etc.

You must note that existing NRE and FCNR account can be converted into an RFC account, if you desire such.

More about RFC account

An RFC account can be opened both as term deposit and saving account. Also, the account can be opened in your own name or jointly in the name of any other candidate whom you consider suitable for the purpose. But, loans can’t be raised against an RFC account, as per rules.

In case of an RFC account, the rate of interest is credited quarterly. The interest rate is taxable as per the taxation laws of the country.  For anyone falling under resident category (not ordinary resident) there is a provision in place to avail tax exemption on the interest on an RFC account for the two year period you held your account. Additionally, depending on the terms and currency in use, the rate of interest that you avail on your RFC accounts varies.

What type of funds can be deposited with RFC account?

  1. You can deposit your funds which have been earned in foreign currency during your tenure of stay in the country.
  2. Any fund that has been received through asset sale such as sale of shares, bank account, immovable property and others or the income that has been earned through interest and dividend route.
  3. Superannuation or pension funds which are received from your employer residing in the foreign land.
  4. You can even deposit foreign currency notes which have been brought from foreign lands. But in case the valuation of foreign currency funds exceeds $ 5000 or total value of notes and Traveler’s cheques moves past $10,000, Currency Declaration Form (CDF) is needed to be deposited with the Indian custom authorities.

What’s the main purpose of opening an RFC account?

An RFC account is used for remittances for investment abroad or maintenance of dependants abroad. Even expenses and investments can be made in India using them. The withdrawals are made in rupees. As already discussed, you can easily nominate a resident or non-resident for your account. The balance is paid to the nominee in case the account holder dies. The balance is paid in Indian rupees (if an Indian resident) and remitted abroad (if an NRI).

What are the documents required?

  • RFC declaration form
  • Valid visa copy and immigration stamps
  • Per Passport copy
  • Personal declaration of an applicant

Note:  There is one more type of RFC account (domestic) which can be availed by resident Indians but it offers different features. The RFC account discussed here is particularly for the NRIs.

Ashish Pandey

I am a business and finance journalist who is currently employed at Financial Express and previously at Zee News. My areas of interest include business and foreign policy. You can reach me on Twitter at @ashuvirgo1984 or @eFundsPlus.

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