It is very common for NRIs returning to India to have a considerable amount of foreign currency from their overseas income. Can such NRIs open a Resident Foreign Currency account in India for parking their foreign funds? Read this post to find out.

NRIs who decide to return to India often have considerable savings in foreign currencies from their overseas income. This is either stored in their overseas bank accounts or invested in foreign assets.

What can such NRIs do with their foreign income at the time of returning to India? Should it be converted into INR before returning? But what if an NRI doesn’t want to convert the foreign income into INR for some reason? Isn’t there another alternative? A Resident Foreign Currency Account can be an excellent solution in such cases.

What is a Resident Foreign Currency Account?

A Resident Foreign Currency or RFC account is a type of bank account that allows returning NRIs to bring their foreign income to India without converting it into INR. It can either be a savings, current, or term deposit account that can be held in freely exchangeable foreign currencies like USD, GBP, etc.

RFC savings and term deposits are interest-bearing accounts that allow returning NRIs to generate regular income from their parked foreign savings. After returning to India, NRIs who have now become resident Indians can also withdraw funds from their RFC accounts in INR.

Who is Eligible to Open an RFC Bank Account?

Any NRI who has returned to India after April 18, 1992, and stayed in a foreign country for at least 1 year before returning is eligible to open an RFC account. After returning, the NRI should have permanently settled in India.

Moreover, if an RFC account holder decides to move to a foreign country again, the account can also be converted into an NRE (Non-Resident External) or FCNR (Foreign Currency Non-Resident) account if required. RFC accounts also allow joint holding but only with another returning NRI.

Are the RFC Accounts Taxed?

Yes, the interest generated from an RFC bank account is taxable. But NRIs with RNOR (Resident but Not Ordinarily Resident) tax status can claim TDS (Tax Deducted at Source) exemption for up to 2 years or as long as they hold the RNOR status.

If the NRI returns to a foreign country and converts the RFC account into NRE or FCNR, the taxation will then be as per the FEMA guidelines for these accounts.

How to Open an RFC Account?

If you are eligible to open an RFC account, you can contact a reputed Indian bank to apply for the account. You will be required to submit a duly filled account opening form along with documents like-

  • Photocopy of your passport
  • Expired employment visa or work permit
  • Proof of current address in India

Should You Consider Opening an RFC Account?

If you are a returning NRI who doesn’t want to convert his/her foreign income into INR, you can consider opening an RFC account to park the funds in a foreign currency. If you won’t be needing the foreign funds for a considerable duration, you can also consider opening an RFC FD account as it offers a higher interest rate as compared to an RFC savings account.

Consider a top bank that is well-known for its NRI banking services and offers highly competitive interest rates so that you can generate regular income from your parked foreign funds.