Resident Foreign Currency Account (RFC)

The Foreign Exchange Management Regulation, 2015 regulates various types of foreign currency accounts in India. Under this, an Indian resident can open and maintain a savings or current or term deposit account, be it in or outside India. The Resident of India can open the Foreign Currency Account either single-handedly or jointly.

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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.

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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.

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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.

SIP Investment for NRIsSIP Investment for NRIs

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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  • Who holds RFC Accounts?

    Ans: Any Resident of India who is planning to return back after living abroad for a minimum period of 1 year or more is allowed to open an RFC account.
  • Is interest in RFC Account taxable in India?

    Ans: The interest is exempted only till the residential status of the individual is non-resident or RNOR as per the Income Tax Act, 1961. As soon as the status of the individual changes to “Ordinary Resident”, the interest added to the income turns taxable.
  • How long can I maintain RFC Account?

    Ans: RFC account can be held in a term deposit, savings, or current account form. The term deposit account can be maintained for 1 year to 3 years’ time.
  • Can the NRE account be converted to RFC account?

    Ans: Yes. One has the option to convert their NRE account to RFC account, where foreign currency can be maintained, and the funds are fully repatriable.

Past 5 Year annualised returns as on 01-05-2024

^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.

Tax benefit is subject to changes in tax laws. Standard T&C Apply
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^^The information relating to mutual funds presented in this article is for educational purpose only and is not meant for sale. Investment is subject to market risks and the risk is borne by the investor. Please consult your financial advisor before planning your investments.

#The lumpsum benefit is calculated if policyholder invested ₹10000 monthly for 10 years in the fund with a policy term of 20 years. This Point To Point past performance data of last 10 years has been used to illustrate a scenario for the customers benefit. It is assumed that the past 10 years returns would have also been delivered in last 20 years. This is not guaranteed and not in anyway indicative of what the customer may actually get 20 years from now. The investment is subject to market risk and the risk is borne by the policyholder.

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