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INTRODUCTION:
What is a Foreign Currency Account?
Foreign Currency Account refers to an account which is maintained in currency other than the currency of India / Nepal / Bhutan.
Restrictions on holding Foreign Currency Account:
- A person resident in India shall open / hold / maintain a Foreign Currency Account only as provided in the Foreign Exchange Management Act, its rules or regulations.
- A Foreign Currency Account may be opened / held / maintained by a person resident in India with the permission of the Reserve Bank of India, subject to certain terms and conditions.
EXCHANGE EARNER'S FOREIGN CURRENCY ACCOUNT:
An Exchange Earner's Foreign Currency (EEFC) Account is an account maintained in foreign currency with an authorized dealer (a bank dealing in foreign exchange). It can be opened / held / maintained by a person resident in India.
The Reserve Bank allows individual professionals to credit 100 percent of their foreign exchange earnings into this account subject to the permissible credits and debits.
The Exchange Earner's Foreign Currency Account Scheme lays down the following permissible credits and debits to the EEFC Account:
Permissible Credits to EEFC Account:
- Inward remittance through normal banking channel, other than remittances received on account of foreign currency loan or investment received from abroad or received for meeting specific obligations by the account holder.
- Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in Export Processing Zone / Software Technology Park / Electronic Hardware Technology Park for supply of goods to similar such unit or to a unit in Domestic Tariff Area.
- Payments received in foreign exchange by a unit in Domestic tariff Area for supply of goods to a unit in Special Economic Zone
- Payment received by an exporter from an account maintained with an authorized dealer for the purpose of counter trade.
- Advance remittance received by an exporter towards export of goods or services.
- Payment received for export of goods and services from India, out of funds representing repayment of State Credit in U.S. dollar held in the account of Bank for Foreign Economic Affairs, Moscow, with an authorized dealer in India.
- Professional earnings including directors fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity.
- Interest earned on the funds held in the account.
- Re-credit of unutilized foreign currency earlier withdrawn from the account.
- Amount representing repayment by the account holder's importer customer, of loan / advances granted, by the exporter holding such account.
Permissible Debits to EEFC Account:
- Payment outside India towards a permissible current account transaction in accordance with the provisions of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 and permissible capital account transaction in accordance with the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000.
- Payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in an Export Processing Zone / Software Technology Park / Electronic Hardware Technology Park.
- Payment of customs duty in accordance with the provisions of the Export Import Policy of Central Government for the time being in force.
- Trade related loans / advances, by an exporter holding such account to his importer customer outside India, subject to compliance with the Foreign Exchange Management (Borrowing and Lending in Foreign Exchange) Regulations, 2000.
- Payment in foreign exchange to a person resident in India for supply of goods / services including payments for airfare and hotel expenditure.
RESIDENT FOREIGN CURRENCY ACCOUNT:
A person resident in India may open / hold / maintain with an authorized dealer in India a Foreign Currency Account known as a Resident Foreign Currency (RFC) Account, out of foreign exchange:
- received as pension or any other superannuation or other monetary benefits from his employer outside India.
- realised on conversion of assets which were acquired, held or owned by such person when he was resident outside India.
- received or acquired as gift or inheritance from a person who was resident outside India.
- acquired or received before the 8th day of July, 1947 or any income arising or accruing thereon which is held outside India by any person or acquired as gift or inheritance from there.
- received as the proceeds of life insurance policy claims / maturity / surrender values settled in foreign currency from an insurance company in India permitted to undertake life insurance business by the Insurance Regulatory and Development Authority.
- The funds held in a Resident Foreign Currency Account shall be free from all restrictions regarding utilisation of foreign currency balances including any restriction on investment in any form, by whatever name called, outside India.
RESIDENT FOREIGN CURRENCY (DOMESTIC) ACCOUNT:
A person resident in India may open / hold / maintain with an authorized dealer in India, a Resident Foreign Currency (Domestic) Account out of:
- foreign exchange acquired in the form of currency notes, bank notes and travellers cheques; and
- foreign exchange earned through export of goods / services, royalty, honorarium or by any other lawful means, and / or gifts received from close relatives (as defined in the Companies Act).
This account is not interest bearing and is maintained in the form of Current Account. There is no ceiling on the balances in the account.
FOREIGN CURRENCY ACCOUNT OF A UNIT IN A SPECIAL ECONOMIC ZONE:
A unit located in a Special Economic Zone may open / hold / maintain a Foreign Currency Account with an authorized dealer in India provided:
- all foreign exchange funds received by the unit in the Special Economic Zone are credited to such account;
- no foreign exchange purchased in India against rupees is credited to the account without the Reserve Bank's permission;
- the funds held in the account are used for bonafide trade transactions of the unit.
The funds held in these accounts are not to be lent or made available to any person / entity resident in India, not being a unit n Special Economic Zones.
FOREIGN CURRENCY ACCOUNT OUTSIDE INDIA:
The following can open / hold / maintain a Foreign Currency Account with their respective offices / branches or banks outside India for the purpose of transacting their business, subject to certain terms and conditions:
- An authorized dealer in India with his branch / head office / correspondent outside India.
- A branch outside India of a bank incorporated in India with a bank outside India.
- A shipping / airline company incorporated in India with a bank outside India.
- Life Insurance Corporation of India or General Insurance Corporation of India and its subsidiaries with a bank outside India.
- A firm / company / body corporate registered in India with a bank outside India, in the name of its office / branch set up outside India.
- A person resident in India, being an exporter, with a bank outside or in India.
- A person resident in India who has gone abroad for studies or who is on a visit to a foreign country with a bank outside India.
- A person resident in India who has gone out of India to participate in an exhibition / trade fair outside side India with a bank outside India.
- A foreign national resident in India being an employee of a foreign company / an Indian citizen employed by a foreign company outside India, with a bank outside India.
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