Prospective job offers and better living conditions have encouraged individuals to settle abroad for a long term basis. However, it is not uncommon for these individuals to return back home after a certain period of time. Over this time, these individuals would collect a large amass of wealth, in the form of assets and income investments. These income investments can be in the form of NRI account such as the NRO, NRE and FCNR account.
These accounts in particular, are associated with the NRI status of an individuals. Once the individual returns home, the status of the individual changes back to the regular status. At such a stage, even the status of the financial accounts will change. If you possess any of the NRI accounts, here is what you can expect:
* Any NRO account you possess will be converted back to a resident saving account.
* Any NRE or FCNR account will be converted into the RFC account. The RFC account also known as the Resident Foreign Currency account will be converted if the account holder meets certain conditions.
* NRI accounts also offer termed deposits. If you have invested in any of the termed deposits, it will continue until its maturity rate. After maturity, the NRE and FCNR fixed deposits in particular will be converted into the RFC account.
* Alternatively, you can break the termed deposit by paying a penalty charge.
* If you stayed abroad for 9 years in previous 10 years then interest earned on RFC account is also tax free for another 2 years.
What are the different benefits you can get from an account that has been converted to RFC account?
Once the NRI account is converted into the RFC account, the account holder will get plenty of benefits. One benefit of the RFC account is that the balance from the account can be used for local payments. Alternatively, it can be remitted back abroad for any bonafide purposes such as education fees. This makes for an excellent benefit to the account holder, as there is no requirement to pay extra charges for the exchange conversion charges. However, the RFC account can only offer its benefits on the amount of years the account holder has stayed abroad. If the account holder holds a residency of over 9 years out of the 10 years, then there will be no taxation on interest earned in this account for a period of 2 years. If the NR regains the status back, then the funds in the account will be reconverted back into the NRE or FCNR account as previously done. This makes for an excellent option for those who would return back to their lives abroad after a year or so.
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