It is very common for NRIs returning to India to bring foreign currency, which they do not want to convert into INR. An RFC or Resident Foreign Currency Account can be an excellent choice for such NRIs. Read this post to know more about this account.
After working for several years abroad, NRIs generally have foreign funds, such as funds from their international bank account, etc., which they bring to India while returning permanently. For many different reasons, a lot of NRIs do not want to convert these foreign funds into INR upon returning.
Needless to say, any foreign currency cannot be deposited into a standard bank account in India. To fulfil the requirements of such NRIs, banks offer RFC or Resident Foreign Currency account. Here are 5 important things that returning NRIs should know about RFC accounts-
1. What is an RFC Account?
An RFC or Resident Foreign Currency Account is a type of savings bank account that can be opened by NRIs who have returned to India permanently and want to deposit their foreign funds. With most top banks in India, the account can be maintained in USD and GBP. If the foreign funds are not in these two currencies, then they can easily be converted to USD or GBP by the bank.
Like most other savings accounts, an RFC account also generates interest income based on the bank you select and the balance deposited into the account.
2. How to Withdraw Funds from Your RFC Account?
Withdrawals from an RFC account can only be in INR. In other words, the foreign funds that you deposit in the RFC account will remain in the same currency only as long as you do not withdraw the funds. On withdrawal, the requested amount will be converted into INR as per the current exchange rate.
Withdrawals can either be in cash or direct deposit into any other INR account. Most banks also require the account holder to submit a copy of PAN for withdrawals above Rs. 50,000.
3. What If the RFC Account Holder Decides to Move to a Foreign Country Again?
If the RFC account holder decides to move to a foreign country and regains his/her NRI status, then the funds deposited into the account can be transferred to his/her FCNR (Foreign Currency Non-Resident) or NRE (Non-Resident External) account.
If the account holder does not have an FCNR or NRE account, then the existing RFC account can be converted into either of the two on the customer’s request. Most banks now offer this change of status facility.
4. What are the Tax Implications of an RFC Account?
The interest that the account holder earns on the balance maintained in his/her RFC account is taxable in India. However, NRIs who have returned to India but still maintain their RNOR (Resident but Not Ordinarily Resident) tax status at the starting of the financial year can claim TDS deduction for that year.
But note that every NRI who returns to India does not qualify for the RNOR status. There are eligibility requirements that NRIs should fulfil in order to qualify for the tax benefits associated with the RNOR status. For instance, the status is only available for NRIs who have lived abroad for at least 7 years.
5. How to Apply for an RFC Account?
You can visit the nearest branch of your preferred bank with the below-mentioned documents to apply for a foreign currency account-
Self-attest these documents and submit them with a duly filled account opening form.
RFC Account to Store Foreign Funds in India
If you are about to return to India and wish to bring foreign funds that you don’t want to convert into INR, then an RFC account can be very helpful. It is an interest-generating account with complete flexibility to withdraw and move your funds to any account of your choice.
Look for a reputable bank that offers an extensive range of NRI products and services to experience all the benefits of an RFC account.
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