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Overview

Facilities for the Returning NRIs

As an Non-resident Indians you may continue to maintain your bank accounts in foreign currency, even after your return to India for permanent settlement. These accounts are known as Resident Foreign Currency accounts (RFC). The main advantage of the RFC accounts is that it is maintained in foreign currency and the deposit is protected against any fluctuations in the exchange rates.

Features & Benefits

  • Resident Foreign Currency (RFC) accounts can be maintained by returning NRIs by way of foreign currency deposits in India
  • The RFC term deposit accounts can be opened in following currencies: USD, GBP and EUR
  • Account can be held jointly with another person resident in India who is eligible to open an RFC account
  • Balance in RFC account can be freely utilised for investments and expenses in India and also for overseas expenses or investments
  • RFC accounts can be opened by transfer of balances in FCNR deposits with banks in India. This also includes the maturity proceeds of the Resurgent India Bonds (RIBs)
  • The account cannot be opened with funds from an NRE account. However, once the RFC account is opened with eligible funds as above, the balances in the NRE account of the depositor can be transferred into the RFC account
  • If a returning NRI once again decides to settle abroad, the balance in RFC account can be converted or transferred to FCNR account, NRE account and can also be repatriated abroad

Eligibility

You must be a resident in India to open or hold an RFC account out of Foreign Exchange received.

  • As pension or any other superannuation or other monetary benefits from his employer outside India; or
  • Proceeds of assets being foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India; or
  • Received as a gift or inheritance from a person who was resident outside India

In this regard, foreign security is defined as any security, in the form of shares, stocks, bonds, debentures or any other instruments denominated or expressed in foreign currency and includes securities expressed in foreign currency, but where redemption or any form of return such as interest or dividends is payable in Indian currency.

FAQs

Who is eligible to open an RFC account?
  • A person resident in India can open or hold an RFC account out of Foreign Exchange received
  • As pension or any other superannuation or other monetary benefits from his employer outside India; OR
  • Proceeds of assets being foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India; OR
  • Received as a gift or inheritance from a person who was resident outside India
  • In this regard, foreign security is defined as any security, in the form of shares, bonds, debentures or any other instrument denominated or expressed in foreign currency and includes securities expressed in foreign currency, but where redemption or any form of return such as interest or dividends is payable in Indian currency.
What funds can be credited to RFC accounts of Returning Indians?

The entire amount of foreign exchange brought to India at the time of their return to India for permanent settlement as well as the balances standing to the credit of their NRE and FCNR accounts at the time of return can be credited to RFC accounts. However, if the aggregate value of the foreign exchange in the form of currency notes, bank notes or travellers cheques brought in exceeds USD 10,000/- or its equivalent and/or the value of foreign currency exceeds USD 5,000/- or its equivalent, it should be declared to the Customs Authorities at the Airport in the Currency Declaration Form (CDF), on arrival in India.

Are the balances in NRE/FCNR account permitted to be credited to RFC account?

RFC deposit accounts can be opened by transfer of balances in FCNR deposits with banks in India. This also includes the maturity proceeds of the Resurgent India Bonds (RIBs). The account cannot be opened with funds from an NRE Rupee Account. However, once the RFC account is opened with eligible funds as above, the balances in the NRE Rupee Account of the depositor can be transferred into the RFC account.

Is the interest earned on RFC account liable to tax?

The treatment of deducting tax at source on interest earned on RFC Deposit Account is similar to Domestic Term Deposits. The tax on interest income from RFC is exempted till such time as the Returning Indians maintain the status of ' Non Resident ' or 'Resident but Non Ordinary Resident'. A returning NRI covered by the definition of resident in current year will be considered 'resident but not ordinarily resident ' if he is a non-resident for 9 out of 10 immediately preceding financial years or if he been in India for not more than 729 days during the preceding seven financial years.

Who can be a joint holder for RFC account?

The account can be held jointly with another person resident in India who is eligible to open an RFC account.

What is the interest rate and tenures for RFC deposits?

The interest rates offered for RFC Deposits is at par with FCNR deposits and the tenure ranging from minimum of 1 year to maximum of 3 years. Premature withdrawal will attract 1% penalty plus swap cost if applicable will be deducted.

Can funds in the RFC account be repatriated abroad?

Yes. Funds in RFC accounts can be remitted abroad for any bonafide purpose of the account holder or his dependents including exchange required for travel and other personal purposes and investments.

Can RFC account be opened any time after returning to India?

Yes, there is no restriction as long a resident in India meets the condition of eligibility as stated above. Further, for returning NRIs, the eligibility to open this account is not linked in any way with their RNOR status under the Income Tax Act.

In which currencies can the RFC accounts be opened?

RFC term deposit accounts can be opened in following currencies: USD, GBP and EUR

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  • SAVINGS RATES

  • Daily balance upto 1 lac 4 %
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  • DEPOSIT RATES

  • NRO - 1 year to below 1 years 2 months 9.25 %
  • NRE - 2 years 6 months to below 2 years 9 months 9 %
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