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An RFC (Resident Foreign Currency) account is a specialised banking option for residents allowing them to hold and transact in foreign currencies. It’s meant for individuals returning to their home country after living abroad or deemed residents with foreign income/assets. The account lets holders maintain funds in different foreign currencies without converting to the local currency. It aids in managing foreign income, pension, or investments, offering flexibility for international transactions and currency fluctuations. Understanding the RFC account’s features is essential for individuals dealing with global finances in their home country’s banking system.
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Who Can Open a Resident Foreign Currency Account?
Any NRI who arrived back in India on or after 18 April 1992, is eligible to create an RFC account. An NRI who is employed overseas and whose stay is expected to last at least a year before returning to India may also create an RFC account. To create an RFC account, PIOs (persons of Indian origin) or NRIs who are returning to India permanently are eligible. In the event that a person becomes an NRI once again, an RFC account may be changed to an FCNR(B) (Foreign Currency Non Resident (Bank)) or NRE (non resident external) account.
Foreign Currency Account for a Resident Indian
A ‘Foreign Currency Account’ refers to an account held or maintained in a currency that is not the official currency of India, Bhutan, or Nepal. Any individual residing in India is eligible to open, possess, and manage a foreign currency account. The term ‘Person Resident in India’ is defined in Section 2(v) of the Foreign Exchange Management Act, 1999 (FEMA).
A person residing in India for more than 182 days during the preceding financial year is considered a ‘Person Resident in India’. However, this does not include individuals who have left or are staying outside India for purposes like employment, business, or other endeavors, where they express an intention to remain abroad for an indefinite period.
● This category also encompasses every individual or corporate entity that is incorporated or registered in India.
● Additionally, it covers offices, agencies, or branches located in India, which are owned or controlled by individuals residing outside India.
● It also encompasses offices, agencies, or branches situated outside India, which are owned or controlled by individuals residing in India.
● In essence, a ‘Person Resident in India’ includes individuals with a substantial presence in the country and entities that are registered or have a significant operational presence within India, as well as entities abroad that are owned or controlled by Indian residents.
Funds Credited to RFC Accounts
- RFC accounts can receive various foreign exchange assets held by an NRI while living outside India, including deposits in foreign banks, investments in foreign currency, stocks, bonds, moveable property situated outside India, and other investments.
- Profits earned in foreign currency from employment, businesses, or other ventures initiated by an NRI while residing outside India can be credited to RFC accounts.
- Upon returning, amounts from their NRE/FCNR accounts that were to their credit can also be credited to RFC accounts.
Type of Account
RFC accounts may only be held individually or jointly in the names of qualified individuals and maintained as current, RFC saving account (without check capability), or term deposit accounts. For one to three years, term deposit accounts can be kept open.
Foreign Currencies
A bank account kept in foreign currency is known as an RFC account. Any freely convertible foreign currency, including US Dollars, Pounds, Yen, and Euros, can be used to create an RFC account. These are foreign currencies that are widely accepted on the global market and can be readily exchanged for other currencies. Only withdrawals in rupees are authorised in India, and the bank will often credit the customer’s resident rupee bank savings account.
Documents Required for Opening RFC Account
The following papers are often required:
- A photocopy of the pages containing each applicant’s passport information and personal information a replica of a valid visa and immigration stamps proving a minimum one-year stay abroad
- A copy of your passport, an RFC declaration form, and an RFC to NRE
- You can either send the RFC balance abroad or transfer money from your RFC account into an NRE or FCNR (foreign currency non-repatriable) account if you decide to travel abroad once more for an extended period of time.
Conclusion
For returning NRIs, the Resident international Currency Account (RFC) is a critical financial tool that enables them to easily handle their international interests once they arrive in India. An RFC account may be opened by eligible people, including NRIs, PIOs, and those anticipating a protracted abroad stay. This account offers a safe way to keep international assets because it is denominated in freely convertible foreign currencies. Additionally, it makes it possible for quick money repatriation and, if necessary, conversion to Indian Rupees. NRIs may take full use of the RFC account to efficiently manage their overseas investments while residing in India by complying with regulatory requirements and providing the necessary documents.