On July 31, 2012, RBI has revised its guidelines related to EEFC (Export Earners’ Foreign Currency) Account vide notification RBI/2012-13/151 A. P. (DIR Series) Circular No. 12.
As per revised guidelines, credit of 100% foreign exchange earnings to the EEFC account is allowed 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.
In simple terms, balances outstanding in an EEFC account as on July 31, 2012 and those balances that would accrue in the account during the month of August 2012 shall get converted to Rupee balances on or before close of business on September 30, 2012. And, similar procedures to be followed for subsequent months.
Following is the history of RBI guidelines relating to EEFC account.
1. The foreign exchange earners were permitted to retain 100% of their foreign exchange earnings in EEFC account with any AD in India as per A.P. (DIR Series) Circular No.15 dated November 30, 2006.
2. Subsequently, the foreign exchange earners were eligible to retain only 50% of his/her export earnings in EEFC accounts and the balance 50% to be surrendered for conversion to rupee balances as per A.P. (DIR Series) Circular No. 124 dated May 10, 2012
3. And now, 100% of the credit to the EEFC account allowed subject to the condition as explained above.
Please note that this circular would also apply to Resident Foreign Currency (RFC) and Diamond Dollar Accounts (DDA).
Revised RBI Guideline relating to EEFC, RFC and DDA Accounts for conversion into Rupees
About Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) Mr. Jigar specializes on NRI Investments and Taxation. He is proud to be one of only 21 CFA Charterholders in India working as consultants. (In 2011, when he became CFA Charterholder, out of 97,173 CFA Charterholders in the World, only 697 Charterholders were in India and only 3% work as consultant; Source: www.newcfa.org). He received his MBA (Finance) from University of Illinois, Chicago, USA, CPA from USA and a Chartered Accountant from India. Jigar has over 15 years of professional experience including more than 4 years with KPMG USA’s Risk Advisory Services. Currently, he provides Wealth Management and taxation consulting serving clients from USA, UK, Americas, Europe, Middle East, Asia, Africa, Australia and India.
8 Comments
I am US citizen holding NRO accounts in India. I would like to transfer all my NRO Fd to NRE FD. While My all Nro Fds are made by US Dollar and tax paid money. Now what tax liability I suppose to have while transffering my NRO FD to NRE FD. I am not finding any CA in Kota who can Issue the 15A and 15cb. what should I do? Please answer me.
Urmi Gupta
Dear Sir
Our company have an EEFC account, kindly guide us for accounting entries to be pass for receipt of foreign currency and utilisation of such amount.
We are confuse in entries to be pass for exchange rate diffrence.
Thanks
Suresh Jakhar
Can you please tell me can I purchase polish goods in DDA and same goods can I sell in dda
Please check with your bank where you have DDA account and your CA. Thanks.
Is there an exception in case of rfc account (balances to be converted to INR) for certain ctg of person. Like pension etc.
I do not understand your question. Please elaborate. The funds in RFC account are kept in foreign currency (USD/GBP,EUR, etc.). Thanks.
Hi,
Is there any guidelines as to which rate is to be used for reinstatement of balance in EEFC account at the period end.
For eg. Fedai rates as on 31st March
If you are thinking just for accounting, you may take the RBI reference rate or Customs rate. Any difference would be considered as foreign exchange fluctuation for the next year when you actually move the funds. Thanks.