Summary: A Resident Foreign Currency (Domestic) account, commonly written RFC(D), is a foreign-currency account with an authorised dealer bank in India for an eligible resident individual to retain specified foreign exchange receipts. The RBI’s Foreign Currency Accounts by Resident Individuals FAQs dated 16 January 2025, read with RBI’s Foreign Currency Accounts FAQs, FEMA Notification No. FEMA 10(R)/2015-RB and Master Direction No. 14 on Deposits and Accounts, identify RFC(D) as a current account only and non-interest-earning. The permitted credit categories include specified overseas gifts, honoraria and payments, unspent foreign exchange purchased for foreign travel, qualifying foreign-currency earnings and certain ADR/GDR disinvestment or insurance proceeds. Debits may be made for permissible current or capital account transactions; the existence of a balance is not permission for an otherwise prohibited remittance. RFC(D) differs materially from the RFC account generally used for qualifying returning residents and from the EEFC account used by exchange earners. Holding a domestic RFC(D) account does not by itself create an offshore bank account or automatically trigger Schedule FA; separately held foreign accounts and assets must be tested independently. Receipt of a foreign-currency gift, fee, export income or other credit can have its own income-tax/GST consequences even though RFC(D) itself does not pay interest. The article also explains LRS/TCS separation, foreign-exchange gain accounting under AS 11/Ind AS 21, FEMA residential status and documentary controls without endorsing any bank, platform or currency position.
- Legal Basis and Who May Open an RFC(D) Account
- Permitted Credits: Source of Foreign Currency Matters
- Evidence for common receipt categories
- Account Form, Interest, Currency Conversion and Joint Holding
- Permitted Debits and the Difference from LRS
- TCS under section 394 for tax year 2026-27
- Income Tax on Underlying Receipts and Currency Differences
- GST on Export Services and Foreign-Currency Receipts
- Schedule FA and NRI-to-Resident Transition
- Accounting: AS 11 and Ind AS 21
- Risk, Bank Controls and Audit Trail
- Frequently Asked Questions
- Key Takeaways
- Primary Sources and Verification Dates
Legal Basis and Who May Open an RFC(D) Account
FEMA regulates foreign-currency accounts held by persons resident in India. The principal regulations are the Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) Regulations, 2015, Notification No. FEMA 10(R)/2015-RB dated 21 January 2016, as amended. RBI Master Direction No. 14, Part I, consolidates operational directions. RBI’s FAQ dated 16 January 2025 explains that a resident individual can maintain an RFC(D) account with an authorised dealer bank in India; it is not a facility for any company to open an ordinary foreign-currency current account under the same label.
The account’s title is often confused with the broader Resident Foreign Currency (RFC) account. The two have different eligible credit sources and account forms. A returning NRI may qualify for an RFC account for balances transferred from NRE/FCNR(B) accounts or qualifying overseas assets; that is not a reason to put all such money automatically into RFC(D). An exporter may instead use an EEFC account under its own rules. TaxGuru reproduces the RBI accounts master direction and the RBI accounts FAQ for the detailed categories.
| Feature | RFC(D) | RFC | EEFC |
|---|---|---|---|
| Eligible holder | Resident individual | Eligible resident individual | Eligible exchange earner |
| Account form | Current only | Current, savings or term | Current only |
| Interest | Non-interest earning | Rate set by AD bank | Non-interest earning |
| Principal purpose | Retain specified foreign exchange | Qualifying returned-resident/other receipts | Retain exchange earnings |
| Foreign-currency balances | Within eligible credits | Within eligible credits | Within eligible credits and scheme rules |
Permitted Credits: Source of Foreign Currency Matters
The RBI list includes foreign currency received while abroad as payment for certain services, honorarium or gifts, and amounts received from a non-resident visiting India in settlement of a lawful obligation or as specified gifts or honoraria. Unspent foreign exchange purchased from an authorised person for travel abroad can also be retained. Other listed categories include certain gifts from relatives, earnings through export of goods or services or royalty, ADR/GDR conversion-related disinvestment proceeds, and specified foreign-currency insurance claim or maturity receipts from an Indian insurer.
These categories are not a permission to deposit every offshore trading profit, cryptocurrency receipt or foreign bank transfer without documentation. The bank must identify the nature of the funds and their eligibility under the applicable regulation. Where an exporter or professional receives foreign currency, the applicable export-realisation and reporting rules must also be checked. Taxability of the underlying service or gift does not disappear because the proceeds are kept in foreign currency rather than immediately converted to rupees.
Evidence for common receipt categories
| Credit example | Documents to retain | Separate legal question |
|---|---|---|
| Unspent travel foreign currency | Original forex purchase receipt, passport/travel records | Source and permitted retention |
| Foreign gift/honorarium | Donor/payer details, relationship, correspondence | Gift/income-tax chargeability |
| Export/service receipt | Contract, invoice, bank advice, FIRC/eBRC as applicable | Export/FEMA and GST place of supply |
| ADR/GDR conversion proceeds | Holding/conversion and sale statements | Capital-gains and eligibility |
| Foreign-currency insurance proceeds | Policy, insurer settlement statement | Insurance-tax treatment |
Account Form, Interest, Currency Conversion and Joint Holding
RBI’s January 2025 FAQ expressly classifies RFC(D) as a current account and says it is non-interest earning. A depositor should not infer that it provides a term-deposit yield or the bank’s ordinary FCNR(B) deposit rate. Exchange-rate movements may alter the rupee equivalent of the balance without generating interest. Bank service charges, minimum-balance conditions, currencies supported and transaction processing are commercial terms to be confirmed with the authorised dealer; no particular bank’s rate or fee is assumed here.
The FAQ states that RFC(D) can be held jointly with another person eligible to open such an account. The joint-account condition is different from the RFC account’s resident-relative “former or survivor” arrangement. Beneficial ownership and who supplied the currency should remain documented. The customer should also establish the bank’s cash deposit and foreign-currency note acceptance process; possession of foreign banknotes does not by itself establish a permissible source.
Permitted Debits and the Difference from LRS
The RBI FAQ describes RFC(D) balances as usable for permissible current and capital account transactions. The adjective “permissible” is central: a resident cannot use an RFC(D) balance to circumvent an otherwise restricted overseas investment, leveraged forex-margin remittance or another FEMA prohibition. A debit may be subject to the authorised dealer’s documents, purpose code, reporting and remittance conditions. The account does not itself authorise foreign-exchange derivative speculation or trading through an unauthorised offshore platform.
The Liberalised Remittance Scheme is a separate RBI framework for resident-individual remittances for permitted purposes. The fact that money is in RFC(D) does not mean every debit is an LRS remittance, and the fact that a debit is under LRS does not create a fresh category of permitted RFC(D) credit. If a payment is an LRS remittance, the applicable limits, aggregation, documentation and tax-collection provisions must be checked at the transaction date.
TCS under section 394 for tax year 2026-27
The Income-tax Act, 2025, section 394 framework, as amended for 1 April 2026, generally provides a ₹10 lakh annual threshold for specified LRS remittances, with 2% TCS on the excess for education or medical treatment and 20% on the excess for other covered purposes, subject to the detailed statutory exceptions and conditions. This TCS is a collection mechanism and can be credited against final tax; it is not a tax on holding RFC(D) currency and does not grant FEMA permission. TaxGuru’s LRS TCS rates 2026 describes the 2026 changes.
Income Tax on Underlying Receipts and Currency Differences
RFC(D) is an account structure, not an income-tax exemption. A gift from a relative, a taxable gift from a non-relative, an honorarium, export-service receipts, royalty, insurance proceeds and capital proceeds may each be governed by different charging, exemption, withholding and valuation rules. For example, a genuine gift from a qualifying relative may have different consequences from payment for services; a professional fee remains potentially taxable business/professional income even if received in dollars or euros.
Because the RFC(D) account is non-interest-earning, there is ordinarily no account interest to subject to bank-interest TDS. But a foreign-currency balance may appreciate or depreciate against INR. Whether an exchange difference is taxable as business income, capital income or otherwise depends on the underlying character of the receipt, purpose of holding, realisation and applicable law. A mechanical statement that every unrealised personal currency movement is immediately taxable would be too broad; similarly, businesses cannot simply ignore required foreign-exchange remeasurement in their accounts.
GST on Export Services and Foreign-Currency Receipts
Receiving money in foreign currency is not sufficient by itself to establish that an outward supply qualifies as an export of services under section 2(6) of the IGST Act, 2017. The supplier’s and recipient’s locations, place of supply, distinct-person conditions and receipt in convertible foreign exchange or in INR where permitted must be examined. An RFC(D) credit may support an audit trail but does not decide place of supply or eligibility for zero rating. Goods exports and service exports have separate documentation and refund implications.
A business should reconcile the customer invoice, export declaration, foreign inward remittance evidence, exchange rate adopted for GST, bank credit and ledger posting. The bank account itself does not create an exemption from GST or income tax. Where receipts represent non-export domestic supplies, the fact that a foreign visitor pays in foreign currency does not automatically make the supply an export. Any reverse-charge or imported-service liability is a separate question.
Schedule FA and NRI-to-Resident Transition
An RFC(D) account is held with an authorised dealer bank in India. Merely holding that domestic bank account does not mean the individual has a foreign bank account reportable in Schedule FA. However, a resident and ordinarily resident taxpayer may have Schedule FA obligations for actual overseas bank accounts, foreign shares, foreign custodial accounts, beneficial interests or foreign signing authority. The domestic RFC(D) account cannot be used as a substitute for reporting separately held foreign assets. TaxGuru’s Schedule FA guide explains the wider disclosure tests.
Residential status under FEMA and the Income-tax Act uses different tests. A person returning to India after overseas employment should separately establish the FEMA residence change, income-tax ROR/RNOR/NR status, NRE/FCNR(B) conversion requirements, eligibility for an RFC account and any continued overseas account permissions. RBI permits certain overseas accounts maintained while non-resident to continue after return; this should not be conflated with a newly opened RFC(D) account in India.
Accounting: AS 11 and Ind AS 21
For a business subject to AS 11, a foreign-currency monetary item is ordinarily translated at the closing exchange rate at the reporting date, with exchange differences recognised under the applicable standard subject to specific exceptions. A bank balance denominated in foreign currency is a monetary item. The transaction-date recognition rate, settlement rate and closing rate must be consistently documented. Taxable income may require separate computation under the Income-tax Act, 2025 and any applicable tax-computation standards; book profit and taxable profit need not be identical.
For Ind AS reporters, Ind AS 21 governs foreign-currency transactions and translation; a monetary bank balance is generally retranslated at the closing rate and exchange differences recognised in profit or loss unless a specific Ind AS exception applies. Presentation and disclosure should identify significant currency exposures and liquidity risk. An individual holding foreign currency privately does not become subject to corporate accounting standards merely by opening RFC(D); these accounting requirements are relevant to entities and businesses preparing financial statements under the standards.
Risk, Bank Controls and Audit Trail
RFC(D) balances face foreign-exchange movements against the rupee and bank/counterparty operational risks. Because the account pays no interest, a positive change in its INR equivalent should not be described as guaranteed yield. The bank may require evidence of legitimate foreign-currency acquisition and the remittance purpose. A person holding significant notes should also consider documentation of customs/currency-declaration rules when bringing foreign currency into India; RFC(D) account eligibility does not replace entry declarations.
- Verify the individual’s FEMA residential status and bank eligibility before opening.
- Classify every incoming credit against a permitted RBI category and retain documentary proof.
- Separate foreign-currency receipts from taxability of underlying gifts, fees, exports or gains.
- Confirm that proposed debits are independently permitted under FEMA and applicable AD procedures.
- Apply LRS/TCS only where the actual remittance is within that regime.
- Review overseas accounts/assets independently for Schedule FA; domestic RFC(D) alone is not an overseas account.
- Businesses should reconcile AS 11/Ind AS 21 currency remeasurement with tax and GST records.
Frequently Asked Questions
1. Who can open an RFC(D) account?
An eligible resident individual with specified permissible foreign-exchange receipts can open an RFC(D) account with an authorised dealer bank in India.
2. Is RFC(D) a fixed deposit that earns interest?
No. RBI’s January 2025 FAQ classifies RFC(D) as a current account and non-interest earning.
3. Can unspent foreign travel currency be deposited?
It is among the listed permissible sources, subject to the bank’s documentation and current regulatory conditions.
4. Can an RFC(D) balance be sent abroad for any purpose?
No. RBI describes debits as available for permissible current or capital account transactions; the underlying remittance must independently comply with FEMA.
5. Is RFC(D) the same as an RFC account for a returning NRI?
No. RFC has distinct qualifying sources and can take current, savings or term-deposit form; RFC(D) is a non-interest-bearing current account.
6. Is a domestic RFC(D) account automatically reportable in Schedule FA?
No. Schedule FA addresses specified foreign assets and interests; separately held overseas accounts must be examined independently.
7. Is tax charged merely because foreign currency is deposited?
Not merely for the act of deposit. The underlying gift, fee, export income or other receipt and any exchange differences require their own tax analysis.
8. Does RFC(D) permit offshore leveraged forex trading?
No. An RFC(D) balance does not override FEMA restrictions or legitimise an unauthorised offshore platform or remittance.
Key Takeaways
- RFC(D) is a domestic foreign-currency current account for eligible resident individuals.
- It is non-interest earning and differs from RFC and EEFC accounts.
- Permitted credit source and documentary proof matter more than the currency label.
- Debits must be independently permissible under FEMA.
- LRS/TCS applies only when the transaction meets that separate framework.
- Domestic RFC(D) holding is not automatically a Schedule FA foreign bank account.
- Underlying receipts, GST and AS 11/Ind AS 21 translation require independent review.
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Disclaimer: This article is for general educational and compliance information based on RBI FAQs dated 16 January 2025, FEMA foreign-currency-account regulations, RBI directions and Indian tax material reviewed on 12 October 2026. It is not a recommendation to open an account, hold any currency, enter any trade or use any bank or forex platform, and is not individual legal, tax, GST, FEMA, investment, banking or accounting advice. Eligibility, permitted credits/debits, currency declarations, export receipts, LRS/TCS, residency, foreign-asset disclosure, taxability and financial reporting depend on current rules and the transaction’s facts. Rates, bank charges, regulatory directions and reporting requirements can change; readers should verify current RBI/authorised-dealer directions and applicable tax law. TaxGuru, its owners, management, editors, authors, employees and affiliates accept no responsibility or liability for any loss, penalty, interest, damage, decision, regulatory breach or consequence arising from reliance on this article.
Primary Sources and Verification Dates
- Reserve Bank of India, “Foreign Currency Accounts by Resident Individuals”, FAQs as on 16 January 2025, pp. 1–4: eligibility, RFC(D) account form, interest and permitted credits/debits.
- FEMA Notification No. FEMA 10(R)/2015-RB dated 21 January 2016, as amended, and RBI Master Direction No. 14 on Deposits and Accounts, Part I.
- Income-tax Act, 2025, section 394 (TCS on specified LRS remittances), as amended effective 1 April 2026.
- ICAI Accounting Standard AS 11 and Ind AS 21 for monetary foreign-currency balances; IGST Act, 2017, section 2(6), for export-of-services conditions.
