What is Resident Foreign Currency Account?

A Resident Foreign Currency Account (RFC Account) is a specialized bank account designed for residents in India to hold, manage, and operate in foreign currencies. This account type offers a range of benefits tailored for individuals who have foreign currency earnings or require transactions in foreign currencies. Below, we explore the key features, benefits, and regulations associated with RFC Accounts.

Resident Foreign Currency Account (RFC Account): An RFC Account allows residents to maintain and transact in foreign currencies. It is particularly useful for individuals who receive foreign income, such as those working abroad, or for those who need to make payments or investments in foreign currencies.

Purpose: The primary purpose of an RFC Account is to facilitate foreign currency transactions for Indian residents. It provides a convenient way to manage foreign earnings, make international investments, and handle other foreign currency-related transactions without the need for frequent currency conversion.

1. Currency Holding: RFC Accounts enable the holding of foreign currencies such as USD, EUR, GBP, etc. This allows account holders to keep their foreign earnings in their original currency, avoiding unnecessary conversion costs.
2. Interest Rates: The interest rates on RFC Accounts may vary depending on the bank and the currency in which the account is held. Interest earned on RFC Accounts is generally credited in the same foreign currency.
3. Transaction Facilities: Account holders can use RFC Accounts for various transactions including receiving foreign income, making international payments, and investing in foreign financial instruments.
4. Accessibility: RFC Accounts offer online and offline banking facilities, allowing easy access to account details, transaction history, and fund management.
5. Tax Benefits: Earnings in an RFC Account are not subject to Indian income tax, provided they are earned from sources outside India. However, interest earned on RFC Accounts is taxable in the respective currency.

1. Eligibility: Indian residents who have returned to India after residing abroad for more than 182 days in a financial year are eligible to open an RFC Account. Individuals who are not Indian citizens or who do not meet the residency criteria are not eligible.
2. Regulatory Framework: RFC Accounts are regulated by the Reserve Bank of India (RBI) under the Foreign Exchange Management Act (FEMA), 1999. The regulations ensure compliance with foreign exchange laws and provide guidelines for maintaining and operating RFC Accounts.
3. Conversion and Repatriation: Funds held in RFC Accounts can be repatriated freely to foreign countries. Account holders can convert foreign currency into Indian Rupees or other currencies as required.
4. Documentation: To open an RFC Account, individuals must provide documentation such as proof of foreign residence, passport, visa, and evidence of foreign earnings or investments.

1. Convenience in Foreign Transactions: RFC Accounts eliminate the need for frequent currency conversion, making it easier for individuals to manage foreign income and expenses.
2. Hedging Against Currency Fluctuations: By holding foreign currency in an RFC Account, individuals can hedge against fluctuations in currency exchange rates, thereby preserving the value of their foreign earnings.
3. Simplified Investment: RFC Accounts facilitate investments in foreign financial markets without the need to convert funds into Indian Rupees, allowing for seamless international investment opportunities.
4. Efficient Management of Foreign Earnings: For individuals who have worked abroad or have foreign income sources, RFC Accounts provide a dedicated platform to manage and utilize their earnings effectively.

You can open an RFC Account with HDFC Bank in the following currency denominations- 
 
RFC Savings account can be opened in : USD, EURO and GBP currencies.

RFC Fixed deposit can be opened in : USD, GBP, JPY and EURO currencies 
 
In case you wish to know more details on RFC Account click here.  
 
* The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.