Are you planning to return to India but wish to maintain your funds in foreign denominations? With RFC savings or a fixed deposit account, you can conveniently park your funds in foreign currency. Read further to know more about the RFC account and its benefits.

For non-resident Indians, there are options of NRE/NRO or FCNR accounts when it comes to opening a savings or fixed deposit account. But if you are a returning Indian who wants to hold his/her funds in foreign currency, opening an RFC account can be more useful for you.

A person residing in India can open an RFC account to manage foreign currency funds received as:

  • Compensation or other monetary benefits received from an overseas employer.
  • Money received against the sale of assets outside India.
  • Gift/inheritance or interest/dividend received outside India.

Let’s look at some of the major benefits of RFC accounts:

Benefits of an RFC Account:

  1. Protects Against Fluctuating Exchange Rates: Since your money is maintained in foreign currency only, an RFC account acts as a hedge against varying foreign exchange rates.
  2. Flexible Currency Options: An RFC account can be funded with different convertible currency options. However, they are usually maintained in GBP or USD.
  3. Tax-Exemption on Interest: You can avail of tax exemption on the interest earned on your RFC account, but the exemption will be applicable only till the year your residential status is RNOR or a non-resident. Once your residential status changes to an ordinary resident, the interest earned will become a part of your taxable income.
  4. Easy Repatriation: The funds in the RFC account, including the interest, is fully repatriable. The deposit can be used for any investment or expenses abroad.
  5. Easy Withdrawal in India: You can easily withdraw funds from the RFC account for use in India. The currency will be converted as per the current exchange rate, and withdrawals can be made in the form of rupees.
  6. Easy Transfer to NRE/FCNR Accounts: If the account holder of the RFC account goes abroad again for an extended period, he can choose to remit the amount or get it easily transferred to his NRE or FCNR accounts.
  7. Nomination Facility: RFC accounts also offer a nomination facility. You may nominate a resident or non-resident that can remit the money in case of the account holder’s death.
  8. Joint Holding: RFC accounts also provide the facility to hold an account jointly. A resident relative can jointly hold the RFC savings account on a “former or survivor” basis, whereas in the case of an RFC fixed deposit account, the joint holder must also be a returning NRI.

Keep Your Foreign Currency Funds Protected with RFC Accounts:

RFC accounts are convenient and useful, especially for NRIs who plan to return to India since the amount can easily be repatriated and used in India. Also, since the money stays free from any exchange-rate risks, it is recommended to maintain partial amounts in the RFC account along with the NRE account.

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