FAQ(EXPORTS)


FAQ

EEFC ACCOUNTS:                                                                               (UPDATED 5th July 2016)

Q 1. What is an EEFC Account and what are its benefits?

Ans. Exchange Earners’ Foreign Currency Account (EEFC) is an account maintained in foreign currency with an Authorised Dealer Category – I bank i.e. a bank authorised to deal in foreign exchange. It is a facility provided to the foreign exchange earners, including exporters, to credit 100 per cent of their foreign exchange earnings to the account, so that the account holders do not have to convert foreign exchange into Rupees and vice versa, thereby minimising the transaction costs.

Q 2. Who can open an EEFC account?

Ans. All categories of foreign exchange earners, such as individuals, companies, etc., who are resident in India, may open EEFC accounts.

Q 3. What are the different types of EEFC accounts? Can interest be paid on these accounts?

Ans. An EEFC account can be held only in the form of a current account. No interest is payable on EEFC accounts.

Q 4. How much of one’s foreign exchange earnings can be credited into an EEFC account?

Ans. 100% foreign exchange earnings can be credited to the EEFC 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.

Q 5. Whether EEFC Account can be opened by Special Economic Zone (SEZ) Units?

Ans. No, SEZ Units cannot open EEFC Accounts. However, a unit located in a Special Economic Zone can open a Foreign Currency Account with an Authorised Dealer in India subject to conditions stipulated in Regulation 4 (D) of Foreign Exchange Management (Foreign Currency Accounts by a person Resident in India) Regulations dated January 21, 2016.

Q 6. Is there any Cheque facility available?

Ans. Yes, Cheque facility is available for operation of the EEFC account.

Q 7. What are the permissible credits into this account?

Ans. i) Inward remittance through normal banking channels, 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;

ii) Payments received in foreign exchange by a 100 per cent Export Oriented Unit or a unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park for supply of goods to similar such units or to a unit in Domestic Tariff Area;

iii) Payments received in foreign exchange by a unit in the Domestic Tariff Area for supply of goods to a unit in the Special Economic Zone (SEZ);

iv) Payment received by an exporter from an account maintained with an authorised dealer for the purpose of counter trade. (Counter trade is an arrangement involving adjustment of value of goods imported into India against value of goods exported from India in terms of the Reserve Bank guidelines);

v) Advance remittance received by an exporter towards export of goods or services;

vi) 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 authorised dealer in India;

vii) Professional earnings including directors’ fee, consultancy fee, lecture fee, honorarium and similar other earnings received by a professional by rendering services in his individual capacity;

viii) Re-credit of un-utilised foreign currency earlier withdrawn from the account;

ix) Amount representing repayment by the account holder’s importer customer in respect of trade related loan/advances granted by the exporter (subject to compliance with the extant guidelines) holding EEFC account; and

x) The disinvestment proceeds received by the resident account holder on conversion of shares held by him to ADRs/GDRs under the Sponsored ADR/GDR Scheme approved by the Foreign Investment Promotion Board of the Government of India.

Q 8. Can foreign exchange earnings received through an international credit card be credited to the EEFC account?

Ans. Yes, foreign exchange earnings received through an international credit card for which reimbursement has been made in foreign exchange may be regarded as remittance through normal banking channel and the same can be credited to the EEFC account.

Q 9. What are the permissible debits into this account?

Ans. i) 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].

ii) Payment in foreign exchange towards cost of goods purchased from a 100 percent Export Oriented Unit or a Unit in (a) Export Processing Zone or (b) Software Technology Park or (c) Electronic Hardware Technology Park

iii) Payment of customs duty in accordance with the provisions of the Foreign Trade Policy of the Central Government for the time being in force.

iv) Trade related loans/advances, extended 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.

v) Payment in foreign exchange to a person resident in India for supply of goods/services including payments for airfare and hotel expenditure.

Q 10. Is there any restriction on withdrawal in rupees of funds held in an EEFC account?

Ans. 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.

Q. 11. Whether the EEFC balances can be covered against exchange risk?

Ans. Yes, the EEFC account balances can be hedged. The balances in the account sold forward by the account holders have to remain earmarked for delivery. However, the contracts can be rolled over.

Q. 12. Whether EEFC Account is permitted to be held jointly with a resident relative?

Ans : Resident individuals are permitted to include resident relative(s) [as defined in section 2(77) of the Companies Act, 2013] as joint holder(s) in their EEFC account on ‘former or survivor’ basis.

Foreign Currency Accounts by Resident Individuals:                         (UPDATED 1st August 2016)

Q1. Who is a person resident in India?

Answer: Sec 2(v) of the Foreign Exchange Management Act, 1999 (FEMA) defines a person resident in India as:

(i) a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year but does not include-

(A) a person who has gone out of India or who stays outside India, in either case-

  1. for or on taking up employment outside India, or
  2. for carrying on outside India a business or vocation outside India, or
  3. for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period;

(B) a person who has come to or stays in India, in either case, otherwise than-

  1. for or on taking up employment in India, or
  2. for carrying on in India a business or vocation in India, or
  3. for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;

(ii) any person or body corporate registered or incorporated in India,

(iii) an office, branch or agency in India owned or controlled by a person resident outside India,

(iv) an office, branch or agency outside India owned or controlled by a person resident in India;

Q2. What is a foreign currency account?

Answer: A Foreign Currency Account is an account held or maintained in currency other than the currency of India or Nepal or Bhutan.

Q3. What are the major foreign currency accounts that can be opened in India by a resident individual?

Answer: Some of the foreign currency accounts that can be opened by resident individuals with an Authorised Dealer bank in India, along with their features are given below:

Particulars Exchange Earners Foreign Currency (EEFC) Account Resident Foreign Currency (Domestic) [RFC(D)] Account Resident Foreign Currency (RFC) Account
Who can open the account Exchange Earners Individuals Individuals
Joint account

Jointly with eligible persons;

or

With resident relative(s) on former or survivor’ basis.

Relative as defined under Companies Act, 2013 (viz. members of HUF, spouse, parents, step-parents, son, step-son, daughter-in-law, daughter, son-in-law, brother/sister, step-brother/ step-sister)

Relative joint account holder cannot operate the account during the life time of the account holder

Jointly with any person eligible to open the Same as EEFC
Type of Account Current only Current only Current/ savings/ term deposits
Interest Non-interest earning Non-interest earning De-regulated (As decided by the AD bank)
Permitted Credits

1) 100% of foreign exchange received on account of export transactions.

2) advance remittance received by an exporter towards export of goods or services

3) Repayment of loans given to foreign importers

4) Disinvestment proceeds on conversion of ADR/ GDR

5) professional earnings like director’s/ consultancy/ lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity

6) Interest earned on the funds held in the account

7) Re-credit of unutilised foreign currency earlier withdrawn from the account

8) Payments received in foreign exchange by an Indian startup arising out of sales/ export made by the startup or its overseas subsidiaries

1) Foreign exchange received as payment/ service/ gift/ honorarium while on visit abroad or from a non-resident who is on a visit to India

2) Unspent amount of foreign exchange acquired from AD for travel abroad

3) Gift from close relative

4) Earning through export of goods/ services, royalty

5) Disinvestment proceed on conversion of shares into ADR/ GDR

6) foreign exchange received as earnings of LIC claims/ maturity/ surrendered value settled in forex from an Indian insurance company

1) Foreign exchange received by him as superannuation/ other monetary benefits from overseas employer

2) Foreign exchange realised on conversion of the assets referred to in Sec 6(4) of FEMA

3) Gift/ inheritance received from a person referred to in Sec 6(4) of FEMA

4) Foreign exchange acquired before the July 8, 1947 or any income arising on it held outside India with RBI permission

6) Foreign exchange received as earnings of LIC claims/ maturity/ surrendered value settled in forex from an Indian insurance company

7) Balances in NRE/ FCNR (B) accounts on change in residential status

Permitted Debits

1) Any permissible current or capital account transaction

2) Cost of goods purchased

3) Customs duty

4) Trade related loans and advances

Can be used for any permissible current/ capital account transactions. No restrictions on utilisation in/ outside India.

Q4. In what form can a foreign currency account in India be opened?

Answer: Unless otherwise specifically stated in the features of the account, a foreign currency account maintained by a person resident in India with an authorized dealer in India can be opened, held and maintained in the form of current or savings or term deposit account in cases where the account holder is an individual, and in the form of current account or term deposit account in all other cases. The account can be held singly or jointly in the name of person eligible to open, hold and maintain such account.

Q5. When can a resident individual open a foreign currency account outside India?

Answer: A resident individual can open a foreign currency account with a bank outside India in the following cases:

1) A resident student who has gone abroad for studies for the period of stay abroad. All credits to the account from India should be made in accordance with FEMA and the rules and regulations made thereunder. On the student’s return to India after completion of studies, the account will be deemed to have been opened under the Liberalised Remittance Scheme (LRS).

2) A resident who is on a visit to a foreign country for the period of stay abroad. The balance in the account should be repatriated to India on return of the account holder to India.

3) A person going abroad to participate in an exhibition/ trade fair for crediting the sale proceeds of goods. The balance should be repatriated to India within one month from the date of closure of the exhibition/ trade fair.

4) The following persons for remitting/ receiving their entire salary payable to them in India:

  1. A foreign citizen resident in India, who is an employee of a foreign company and is on deputation to the office/ branch/ subsidiary/ joint venture/ group company in India;
  2. An Indian citizen who is an employee of a foreign company and is on deputation to the office/ branch/ subsidiary/ joint venture/ group company in India; and
  3. A foreign citizen who is a resident in India and is employed with an Indian company.

5) For the purpose of sending remittances under the Liberalized Remittance Scheme.

Q6. Can a resident continue to maintain an account outside India which was opened by him when he was a non-resident?

Answer: A person resident in India may maintain a foreign currency account outside India if he had opened it when he was resident outside India or inherited it from a person resident outside India.

Q7. What is the status of the account held outside India on the demise of the account holder?

Answer: A resident nominee of an account held outside India has to close the account and bring back the proceeds to India through banking channels