OCI Returned to India: Should You Continue Maintaining Your RFC Account?

Maintaining Your RFC Account:- Are you an OCI holder and have returned to India? If yes, then you might be thinking of closing your RFC account or converting all your foreign currency savings into Indian Rupees, but we suggest you Don’t Close Your RFC Account Because if you still receive a foreign pension, hold overseas investments, have rental income, or plan to move abroad again in the future, maintaining your RFC account can be quite beneficial for you.

In this article, we will explain what an RFC Account is, its benefits for RFC account for OCI holders, and whether it should be maintained after returning to India.

Key takeaways

• OCI holders who have an RFC account can easily hold money in foreign currency without converting it to Indian Rupees.
• Maintain Funds in USD, GBP, EUR, and other approved foreign currencies.
• When you return to India, it is not necessary to close your RFC account.
• All the foreign income, such as Foreign pensions, rental income, dividends, and overseas investment proceeds, can be credited to an RFC account.
• Your RFC deposits are covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC) for a limit of 5 lakhs per depositor per bank.
• Get Interest on fixed period of time and earn it.
• Tax treatment depends on your residential status and the source of income.

Understanding about RFC Account

RFC Account stands for “Resident Foreign Currency” account. This account type holds foreign currency of an NRI who has returned to India. RFC account is primarily opened by returning NRIs or OCI holders who have permanently settled in India and maintain and manage their overseas earnings.

Example-

Suppose Ravi returns to India after working in the USA for 5 years. He has $50,000 in savings.

What if Ravi maintains an RFC account?

• The $50,000 will remain in the account in USD.
• Ravi can convert to INR when required.
• He can receive future US pension or income.
• He can receive more INR if the exchange rate is favorable.

What if Ravi closes the RFC account and converts everything to INR?

• The entire amount will be converted to Rupees.
• The benefit of future currency appreciation will not be available.
• The flexibility of foreign currency holdings will be lost.

In simple words: RFC Account gives returning NRIs and OCI holders the flexibility to keep their foreign savings and income in foreign currency.

Now comes the main point that you want to ask-

Can a OCI holder maintain RFC account?

Yes, an OCI Card holder can maintain an RFC Account if you have foreign currency assets or overseas income, such as

• Receives a foreign pension
• Receives rental income from overseas property
• Receives income from foreign investments
• Receives regular funds from abroad

In these cases, you can maintain your RFC account. There are many benefits of maintaining a Resident Foreign Currency account. To know more, continue reading the section given below.

Benefits of Maintaining Your RFC Account

Protection from Currency Exchange Rate Risk

If you convert your amount into INR immediately, then, in this case, if the rupee ever weakens against USD, you will miss the exchange rate benefit.

An RFC account gives you the flexibility to hold funds in foreign currencies.

Easy to receive Foreign Pension

Many OCI holders receive

• US Social Security Benefits
• Foreign Pension
• Retirement Income
• Overseas Annuity Payments

RFC account provides the facility to receive funds in the original currency for an NRI returned to India.

Easy to manage Overseas Investments

If you have:

• Foreign Stocks
• Mutual Funds
• Overseas Property
• Rental Real Estate

The income from these investments can be received in an RFC Account.

Full Repatriation Benefit

A major advantage of an RFC Account is that funds are generally fully repatriable.

This means that if you relocate abroad again in the future or need to send funds to a foreign country, the process is quite convenient.

Convert to INR When You Want

By maintaining an RFC Account, you don’t need to convert foreign currency immediately.

You can take the decision of conversion according to market conditions and personal financial needs.

Which OCI holders should maintain a RFC account?

Have a look to the following points that Cleary provide you answer which OCI holders can maintain a RFC account-

• If OCI holder receive foreign income.
• Receive a foreign pension.
• You have overseas investments.
• You own foreign property.
• You frequently travel internationally.
• You may plan to relocate abroad in the future.

In which case RFC account not be needed?

If you meet below condition-

• You have no foreign income.
• All overseas assets have been sold.
• You are permanently settled in India.
• You do not need to hold foreign currency.

OCI holder maintain RFC account then he/she need to pay Tax?

Many people think that maintaining an RFC account automatically creates tax liability.

But in reality, tax treatment depends on:

• Your residential status
• The source of income
• The provisions of the Income Tax Act
• The applicable DTAA (Double Taxation Avoidance Agreement)

Therefore, it is always best to seek professional advice regarding your individual situation.

Who want to pay tax or Not?-  Understand from this table

Click here to Know more Information about Nri Taxation from here.

Common Mistakes OCI Holders Make when they returned to India

Look at the following mistake-

• Closing their RFC account too soon.
• Immediately converting all foreign currency into INR.
• Ignoring future foreign income.
• Making decisions without understanding FEMA rules.

Missing the benefits of currency diversification

What helpoci Suggest You?

When you returned to India, Closing your RFC account after immediately is not the right decision for every OCI holder.

Don’t close your account if you have foreign income, overseas investments, a foreign pension, or future international plans, because an RFC account can provide you with flexibility, convenience, and financial security.

It is important to evaluate your income sources, investments, and future goals before making any final decisions.

Need Help with RFC Account, OCI Status or NRI Taxation?

HelpOCI’s expert team can help you understand RFC Account rules, FEMA compliance, OCI regulations and NRI taxation so you can make informed financial decisions.

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