A resident foreign currency account is a type of saving account that is maintained in foreign currencies. This is the best account for those who have returned to India for a temporary yet long basis, with foreign funds to be invested. This type of account has plenty of benefits, especially since it can be held as a term deposit. This term deposit can further be converted into an NRE or FCNR account when the account holder’s status is converted back into an NRI. This account also holds funds that are freely repatriable.
However, before you open this type of account, there are certain factors you will need to understand:
1. Like the FCNR termed deposit, this account can be used to maintain foreign currency. It can also be used to continue to earn interest.
2. The account holder can maintain the account in the form of current, savings or termed deposits as an individual. In other forms, he can hold it in the current or term deposits.
3. The funds and interest earned on the account can be easily remitted to account overseas.
4. The RFC account can be held jointly. However, it can be held only with close relatives. However, these individuals do not have the power to operate the account during the lifetime of the account holder when he returns to the home country.
5. Not all banks or financial institutes will allow you to invest certain foreign currencies. In most cases, GBP, USD and Euro are some of the common currencies allowed.
6. A pension that is earned abroad can also be deposited in this account.
7. You can use the funds from this account for any local payments. When the required funds are withdrawn, it will be converted to the local currency before being deposited in the residents saving account.
8. Once your status gets converted into an NRI, your RFC account will also be converted into an NRI account. However, you will need to inform your bank of the status, in order to enjoy the benefits of this NRI account.
9. When withdrawing funds from the RFC account in India, the amount that is withdrawn will be converted into the value based on the current exchange rate of the foreign currency and Indian rupees.
10. In the first two years, there is no TDS from you RFC account. Additionally, most banks provide an automatic renewal and nomination facility for the fixed deposits for RFC account
As you can see, the RFC account has plenty of benefits for those who are returning to India for a short period of time. This account is your best choice to invest any of your foreign currency for a short period of time. In the occasion you need to return back to a foreign country, you only need to inform your bank of the change of status. In this way, you can continue to enjoy the benefits of the NRI account.
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