RFC: the ideal financial solution for returning Indians

As Indians who are traveling back home permanently, considerable planning would be required to be undertaken. This is no different for the financial investments one has made. But instead of transferring all the funds to the local account, you can convert the account into a resident foreign currency account, also known as RFC. This foreign currency account is ideally the best choice for NRI’s who want to park their foreign funds in India while availing its advantages on returning home.

Given below are the attributes which are specific to this foreign currency account and how it can benefit a returning NRI:

Who is eligible to open the account?

Banks and financial institute’s only offer this account if they satisfy certain eligibility criteria. They include:

• Any resident Indian can open this foreign currency account in any freely convertible foreign currency.
• Returning NRI individuals who have stayed abroad for a continuous period of a one year or more.

What are the different foreign currencies that can be maintained in the RFC account?

As previously mentioned, the RFC account can be open in any freely convertible foreign currency. They include currencies such as the Australian dollar, Canadian dollar, Euro, Great Britain Pound, Japan Yen and the US dollar amongst many others.

What kind of funds can be deposited in this account?

Funds from selected sources could have been deposited in this account. They include:

• Any funds retained in any foreign bank account, in the local foreign currency.
• Any funds that are earned through business or employment abroad. This can also include income earned through interest or dividends.
• Any funds received in the form of superannuation or pension received from a foreign employer.
• Foreign exchange funds that have been received from the sale of assets such as shares, bank accounts, immovable property or any other form of investments held by individuals outside India.

What is the range of interest rates that can be expected in the RFC account?

The RFC account can be held in different forms. Depending on the different forms the interest rate will differ. It also depends on the tenure as well as the currency. This account can be held in:
• term deposits
• current accounts
• saving accounts

What are the tax implications credited in the RFC account?

As per the Income Tax Act, Section 10(15)(iv)(fa) of the Income Tax Act,the interest earned on foreign currency deposits in any Indian Banks is exempted for non-residents and Resident but not Ordinarily Resident. Most returning NRI’s are considered as RNOR’s till their status is changed to resident.


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