Persons resident in India are permitted to maintain foreign currency accounts in India under the following three Schemes
Exchange Earners Foreign Currency Accounts (EEFC Account)
As the name suggests, the account is maintained in foreign currency (say dollar or euro). It is a current account, so interest is payable by the bank. This facility is given to all resident Indians (such as individuals, companies, etc) to park their foreign exchange earnings (earned out of say, exports) so that they can use it for outward remittance, if any without incurring any currency conversion charges. (In to rupee and vice versa)
100% of the earnings can be parked in this account subject to the condition that the sum total of the accruals in the account during a calendar month should be converted into Rupees on or before the last day of the succeeding calendar month after adjusting for utilization of the balances for approved purposes or forward commitments
Permissible Credits – The major one’s are –
- All foreign exchange earnings except foreign currency loans, investment received from abroad
- Payments received in foreign exchange by a unit in the Domestic Traffic Area for supply of goods to a unit in the Special Economic Zone
- Advance received towards supply of goods or services
Permissible Debits – The major one’s are –
- Payment outside India towards permissible current and capital account transaction
- Payment of customs duty
- Payment in foreign exchange to a person resident in India for supply of goods/services including payments for airfare and hotel expenditure
Convert to Rupee account – No, there is no restriction on withdrawal in Rupees of funds held in an EEFC account. However, the amount withdrawn in Rupees shall not be eligible for conversion into foreign currency and for re-credit to the account.
Resident Foreign Currency Accounts (RFC Account)
RFC account is for resident Indians who have returned permanently after residing abroad. This account can be opened in any convertible foreign currency. RFC account can be in the form of savings or term deposit.
Permitted deposits –
- pension of any other superannuation or other monetary benefits from the employer outside India
- any foreign currency notes brought while coming back to India
- money received on sale of assets abroad, bank balance held in foreign banks, interest and dividend earned on overseas investments
- transfer of funds from NRE and NRO account once you become resident in India
Permitted withdrawals –
- The funds in RFC account are free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment outside India.
Resident Foreign Currency (Domestic) Account
The frequent resident Indian travelers can open this account. They can hold foreign currency acquired in the form of currency notes, bank notes and travelers cheques from any of the sources such as payment for services rendered abroad, as honorarium, gift, services rendered or in settlement of any lawful obligation from any person not resident in India.
The account may also be credited with/opened out of foreign exchange earned abroad like proceeds of export of goods and/or services, royalty, honorarium, etc., and/or gifts received from close relatives and repatriated to India through normal banking channels.
The account shall be maintained in the form of Current Account and shall not bear any interest. There is no ceiling on the balances in the account. The account may be debited for payments made towards permissible current and capital account transactions.