Resident Foreign Currency Account – RFC Account for returning NRI

Resident Foreign Currency Account (RFC Account) is a special bank account that can be maintained by resident Indians in foreign currency.

NRI returning to India always worried about what to do with foreign assets and money earned in foreign currency. Common questions asked by NRI’s are – Can I hold foreign currency after returning to India? What is to be done for NRO, NRE and FCNR accounts and deposits? Do I need to convert it in Indian rupee? What will be tax implications?

In this post, I will try to give answers to NRI questions related to NRO, NRE, FCNR and RFC accounts. I will start with RFC account and later stage cover What will happen to NRO, NRE and FCNR accounts?

What is the Resident Foreign Currency Account?

Resident Foreign Currency Account as the name indicates it is a foreign currency account. It is opened and maintained by NRI returning to India. NRI can bring back foreign currency in this account while returning from overseas.

The foreign currency held by NRI when he was resident outside India can be deposited to RFC accounts. This includes funds such as deposits in banks account outside India, real estate properties, shares, and securities as well and money earned by doing business outside India which is held in foreign currency. All these can be deposited in RFC account.

Additionally, earnings via self-employment, job or business when a person was outside India as NRI can be deposited in RFC account. All the money held in NRE/FCNR account can also be transferred to RFC accounts.

RFC accounts are of different types such as saving account, current account or term deposit account. The term deposit account can be maintained for one year to three years.

Also Read – How NRI can get benefits of DTAA agreement of Taxation?

How to open RFC Account?

To open the RFC account, you need to submit a duly filled RFC account opening form available at the bank where you want to open the account. Few banks provide a facility to download this form online from the bank’s official websites.

You need to attach a self-attested passport copy, address proof, expired work permit/employment visa. PIO or OCI card is also required.

This account can be opened only if you are NRI living abroad for one year or above and returning to India permanently. You can take help of a bank representative or agent to open this account.

RFC Account General Information 

• RFC account can be maintained in a limited number of currencies. The most common currencies are USD, GBP, Euro, AUD and CAD.
• The interest will be earned on these deposit. The interest rate is in range of 2.5-3.5%. The interest rate is credited quarterly and taxable.
• RFC account can be opened as a saving, current or term deposit account. No loan is applicable on this account.
• You can use RFC fund for remittance or investment abroad. You can also use this funds for maintenance of dependents or any personal living abroad.
• The fund deposited in this account can be used for making investment in India. A withdrawal from this account can be made in rupee only and deposited in resident saving bank account.
• Nomination facility is available in this account.

Benefits of RFC Account

1. The balance in RFC account is fully repatriable. You can transfer both principal and interest amount.
2. The principal and interest amount is maintained in foreign currency. This means no exchange risk is involved.
3. The amount deposited in this account can be converted in different currencies such as USD, GBP, AUD, CAD etc.
4. Interest is payable on this account. The interest rate varies from bank to bank.
5. You can transfer fund to other account at abroad. You can also transfer this fund to other NRE/FCNR account.

What happens to NRO, NRE and FCNR account after returning to India?

As per FEMA provision, only NRI can hold NRO, NRE and FCNR account. As you are returning back to India you cannot continue these accounts. You need to inform your bank about change in your residential status.

Your NRO and NRE account will be re designated as a resident rupee account. FCNR and NRE deposit can be closed immediately or can be continue up to maturity period. A premature closer will attract a penalty.

If you wish you can transfer FCNR and NRE funds held in foreign currency to RFC account. It can help you to save premature closer charges & penalties.