How do I convert NRE FD to RFC?

To convert an NRE (Non-Resident External) Fixed Deposit to an RFC (Resident Foreign Currency) account after returning to India, you need to follow these steps and consider the following points:

Eligibility and Process

• Once you return to India and become a resident, you can convert your existing NRE FD to an RFC account. This conversion can be done after the NRE FD matures or even before maturity, but it is often more beneficial to wait until maturity to avoid any premature withdrawal penalties34.

Steps to Convert

• Inform your bank about your change in residential status and express your intention to convert the NRE FD to an RFC account.
• The bank will guide you through the necessary documentation, which typically includes updating your account details to reflect your new residential status.
• You may need to fill out specific forms and provide documents such as a self-attested copy of your passport and any other required identification or authorization letters3.

Benefits of RFC Accounts

• RFC accounts allow you to hold the funds in freely convertible foreign currencies like the US dollar, Euro, British Pound, and Japanese Yen.
• The interest earned on RFC accounts is not taxable in India if your residential status is "Resident and Not Ordinary Resident" (RNOR)4.
• Funds in RFC accounts are free from the Liberalised Remittance Scheme (LRS) limits, allowing for unrestricted repatriation abroad4.

Post-Conversion Management

• After conversion, you can continue to manage the RFC account as you would any other resident account, with the flexibility to make additions, withdrawals, and renewals as needed.
• The interest rate on the original NRE FD will remain the same even after the conversion to an RFC account3.

By following these steps, you can effectively convert your NRE FD to an RFC account, which can be particularly beneficial if you have financial goals denominated in foreign currencies or if you plan to return abroad in the future.