Resident Foreign Currency Accounts – A Comprehensive Guide

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Key Takeaways

With Resident Foreign Currency Accounts, NRIs can deposit their foreign currency earnings and earn interest. You can open these accounts in six major currencies. You may also open term deposits of 1 to 3 years with RFC. Funds deposited in this account are fully repatriable.

Introduction

As an NRI, you can use the opportunity to earn and invest your foreign earnings in India and abroad. If you choose to return to India someday, you can bring back your foreign currency and park it in an Indian bank account, specially designed for such deposits. You can open an RFC Account.

What is an RFC Account?

RFC Account full form is Resident Foreign Currency Account. As an NRI, you can deposit your foreign earnings upon returning to India. You can open this account if you intend to permanently settle in India for a continuous period of one or more years. You can continue holding this account even after assuming permanent residency in India. These accounts are offered by major Indian banks authorised by the RBI.

RFC Account Features and Benefits

• You can hold RFC accounts in the form of savings, current, or term deposit accounts of 1 to 3 years.
• You may hold this account with a former NRI now residing in India.
• You can assign a Resident Indian or Non-Resident nominee for your RFC account.
• RFC account interest rates depend on the currency in which the account is opened and are usually similar to FCNR interest rates.
• You can use the funds in the RFC account towards remittances or investments abroad and for investments and expenses in India.
• You can withdraw money conveniently in INR from your bank branch.
• You can fully repatriate and transfer the balances maintained in the account, including any interest earned on deposits.
• You can use the sums parked in this account to pay for your investments are other local expenses in India.
• If you choose to resume your NRI status, you can transfer funds from your NRE or FCNR account without hassles.

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Eligibility Criteria for RFC Accounts

• Any Indian citizen, who chooses to return to Indian after living abroad, can open this account.
• The account holder can be a former NRI or PIO.
• You can open this account if you wish to deposit your pension, superannuation or any other monetary benefits from your employer outside India.
• You can open the account to deposit foreign currencies from converting assets outside, and repatriated to India.

Resident Foreign Currency Account – Documents Needed

• A duly filled account opening form
• 2 Passport-size photographs
• A copy of your current passport
• A copy of your expired employment visa or work permit
• A copy of your current address proof in India
• Your PIO or OCI card, if applicable
• A copy of the past Indian passports of self, spouse, parents or grandparents
• A declaration stating that you are a PIO or OCI
• Indian Residency or work visa

You must self-attest all documents before submitting them to the bank.

Permissible Currencies for Opening Resident Foreign Currency Account

The RBI allows returning NRIs, PIOs and OCI to open the RFC Account in six currency denominations. These include

1. US Dollars
2. Great Britain Pound Sterling
3. Euro
4. Australian Dollar
5. Canadian Dollar
6. Japanese Yen

Tax implications of RFC Accounts

The interest you earn on your RFC Account is taxable in India. However, you can be exempted from paying this tax if you are a Resident but Not Ordinary Resident (RNOR) status holder. The tax on this account is applicable based on when you receive your interest payment, during specific intervals or upon account maturity. If you opt to receive interest at specific intervals, you can inform the bank about your RNOR status for them to not charge you any TDS on interest. If you opt to receive interest on maturity, you must obtain RNOR status before your account matures to receive the tax exemption.

RNOR status is given to Indian Residents based on two criteria:

1. If the individual has not resided in Indian for at least 2 years in the last 10 years.
2. If the individual has not resided in India for 729 days or last, in the last 7 years.

Final Note

Resident Foreign Currency Accounts enable returning NRIs to earn higher returns on their savings held in foreign currencies. The account holder can open an account in one of the six currencies and operate it the same way as their rupee account. Also, there is no limit on the sums you can deposit in the RFC account, so long as you obtain the forex through permissible channels.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.