As a returning Non-resident Indian (NRI) with savings in foreign currency, you may plan to transfer funds from your overseas account. A Resident Foreign Currency Account (RFC) provides a quick and straightforward solution.

 

You can open these deposits in a currency of your choice, including USD, EUR, JPY, etc. This provides a convenient way to maintain overseas earnings in foreign currency. 

Brief Overview of an RFC Fixed Deposit Account

An RFC Fixed Deposit (FD) account allows you to earn interest on your foreign currency savings. You can transfer funds from existing NRE, FCNR, or other overseas remittance accounts. These FDs help reduce the stress associated with foreign exchange conversion. 

 

Though, there may be some risk involved in this aspect at the time of maturity. On regaining NRI status, you can transfer funds back to a NRE account.

Features and Benefits of RFC Fixed Deposit Account

Knowing the features of an RFC account could help you make the right decision. Here are some of them:

Attractive Interest Rates

Some FD issuers offer a high interest rate on an RFC account, allowing you to earn attractive returns

Deposit Funds in Multiple Currencies

When you book an RFC FD, you can deposit the invested sum in foreign currencies, such as EUR, USD, AUD, GBP, CAD, etc.

Option to Book Joint Accounts

The joint holder could be a returning NRI or a resident relative depending on the issuer’s policies  

Risk-free Conversion

There is no foreign exchange risk involved while depositing funds in the RFC FD

Easy Cash Withdrawal

You can withdraw cash in Rupees from your account; though some premature withdrawal charges may apply 

Higher Flexibility

Withdraw cash in Rupees from your account; premature withdrawal charges may apply 

Withdrawal of Cash from an RFC Fixed Deposit Account

You can withdraw cash from an RFC account but you need to follow certain conditions:

  • If you plan to withdraw the account balance in Indian Rupees, you can do so from the branch where the account is held

  • Your interest earnings along with the balance is fully repatriable

  • Funds are remitted to the nominee in case the of the account holder’s unfortunate demise

  • In case the nominee resides in India, the equivalent amount will be paid in Indian Rupees

Eligibility Criteria and Documents Required

Here are a few eligibility criteria you need to be aware of for RFC fixed deposit account:

  • You must be an Indian national returning to India after residing overseas for at least 1 year 

  • You must be a former NRI or belong to the Persons of Indian Origin (PIOs) group

  • You can book this FD as a resident Indian individual

  • You can open this account if you have returned to India before April 18, 1992 

  • You want to transfer superannuation or pension benefits from overseas employers to India

  • You can book this FD to deposit foreign currency after liquidating foreign assets 

 

Once you meet these parameters, you may have to submit the following documents: 

  • Duly filled account opening form

  • Copies of name, date of birth, address, photo, signature, date and place of issue, and expiry date

  • Copies of valid visa and immigration stamps as evidence of foreign stay for a minimum period of 1 year

  • Expired employment visa or work permit

  • Current address proof of a house in India

  • PAN card or Form 16

 

Note: The criteria and documents listed above may vary across FD issuers. Check these parameters with the bank or NBFC before booking an FD. 

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Tax Implications of an RFC Fixed Deposit Account

There are a few tax provisions that apply to these fixed deposits. Here are some essential points to note:

  • The interest earned on RFC FDs is taxable in India

  • The applicable tax rate depends on your residential status under the Income Tax Act, 1961 

  • The tax is payable when your FD starts to earn interest 

  • The interest may be taxed at predetermined intervals or at the time of maturity 

  • NRIs with the Resident but Not Ordinarily Resident (RNOR) status may benefit from tax exemptions on the interest earned u/s 10(15)(iv)(fa)

  • NRIs must inform the FD issuer about their RNOR status to prevent Tax Deducted at Source (TDS) on the interest earned 

  • NRIs must obtain the RNOR status before the FD matures to benefit from the exemption 

Conclusion

As you can see, booking an RFC fixed deposit account allows returning NRIs to deposit their savings in foreign currencies in India. They do not have to convert these currencies into Indian Rupees, helping them avoid exchange rate fluctuations.

Frequently Asked Questions

When can I open an RFC account after returning to India?

You can open an account any time after returning to India. This can be done as long as you meet all the required eligibility conditions.

Is it possible to add a nominee for an RFC account?

Yes, you get the facility of adding a resident or a non-resident as a nominee for your account. 

Can I renew my RFC fixed deposit account?

Depending on the issuer, you may be provided the option to renew your FD after it matures.  

What is the maximum period for which I can open an RFC fixed deposit account?

You can deposit your funds in an RFC fixed deposit account for a maximum period of 36 months or 3 years.

What is an RFC account?

The full form of an RFC account is a Resident Foreign Currency account. This is a specialised investment avenue designed for NRIs who have returned to India. It helps them manage foreign currencies without converting them into Indian currency.

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