Resident Foreign Currency Account (RFC)

There are various types of Foreign Currency Accounts available in India, but in this article, we will primarily focus on the Resident Foreign Currency Account (RFC). 

What is a Foreign Currency Account?

An account in which foreign currency is held or maintained, the currency which is other than that of India, Nepal, Or Bhutan, is known as a “Foreign Currency Account”. Any person residing in India can open a Foreign Currency Account. As per Section 2(v) of the FEMA (Foreign Exchange Management Act) 1999, an Indian Resident means:

• Any individual living in India by birth.

• Or living in India for 182 days in the preceding financial year.

• Or has lived for 60 days in that year specifically.

• Or has been in India for continuous 365 days for the last four years.

• Any company incorporated or registered in India.

What is a Resident Foreign Currency Account (RFC)?

A resident Foreign Currency Account is a type of Foreign Currency Account that any Resident of India can open with an authorized bank in India. Any individual can open an RFC Account, and it is a suitable option for Indians who have returned to India after spending a certain time abroad (generally 1 year or more) and are now willing to manage their earnings (earnings in foreign currency) here.

Some of the main highlights of the RFC (Resident Foreign Currency) Account are as follows:

• Any individual who has returned to India after 1 year or more is eligible to open an RFC Account.

• The account can be directly opened with any authorized bank or an authorized dealer.

• Foreign currency like USD, GBP, EURO, etc.

• An RFC Account can be either savings, current or a term deposit account.

• Funds received from various sources like salary, business, sale of the asset, pension, etc., can be deposited in the RFC Account.

• The account can be held individually or jointly.

• The money deposited in the account can be used for any kind of investment or expense.

• Withdrawal can be made as per the wish of the individual.

• The currency deposited can be easily converted into Indian currency.

• The nomination facility is also available under the RFC Account.

Documents Required to Open RFC Account

The following documents are required to open an RFC account in India:

• RFC Account application form

• Expired work permit or expired visa for employment

• Current passport

• Address proof

Eligibility to Open an RFC Account

Any Indian resident can open RFC Account out of foreign exchange received from the following sources:

• An individual, along with the eligible person, or

• Resident relatives

It is important to know that the relative holder cannot operate the RFC Account during the life of the primary account holder.

Permitted Credits Under the RFC Account

RFC Account can be opened by any Indian resident out of foreign exchange received from the following sources:

• Received as superannuation

• Monetary benefits from the foreign employer

• From the conversion of assets under Section 6(4) of FEMA.

• Gift or inheritance from a person (as per Section 6(4)) of FEMA.

• The exchange is received as any type of earnings from LIC (can be claims, maturity, surrender value, etc.)

• The remaining balance in the person’s NRE / FCNR accounts from abroad to India at the time of shift.

Under the permitted debits, no such restriction is implied on utilization, be it outside India or in India.

Foreign Currency Accounts are extremely beneficial for NRIs (Non-Resident Indians) who are planning to return to India and have money or assets with them in foreign currency.

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