It is provided by Regulation No. 4 of Foreign Exchange Management (Foreign Currency Account by a Person Resident in India) Regulations. 2000, that a person resident in India may open, hold and maintain with an authorised agent in India, a Foreign Currency Account to be known as Exchange Earner’s Foreign Currency (EEFC) Account, subject to the terms and conditions of this Scheme specified in the Schedule.
Thus, the earners of foreign exchange are allowed to retain upto 25% of the inward remittance in foreign currency in such EEFC accounts. However, in the case of hundred percent export-oriented units and units in export processing zones, software technology parks or electronic hardware technology parks, upto 100 per cent of foreign exchange is allowed to be credited to the EEFC accounts. Any other person resident in India is allowed to credit 50% to EEFC A/c out of the foreign exchange earnings. The exporters who are allowed by the RBI to open foreign currency account abroad, are not allowed to open EEFC accounts. Thus, the NRIs returning to India in particular and the other residents in India in general who are exporters, should remember the provisions regarding the EEFC and take advantage of the same. The interest earned by a resident on EEFC account balances is, however, not exempt from income tax.