With the never-ending doubts around the domain of fund transfers from one type of account to another, Non-Resident Indians(NRI) and Overseas Citizens of India(OCIs) often spend their valuable time wondering whether they can transfer funds from NRE to NRO Account. In this article, we will resolve this eternal doubt for our NRIs all over the globe once and for all.
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Can NRIs transfer funds from NRE to NRO Account?
YES! NRIs can transfer funds from their NRE (Non Resident External) Account to their NRO (Non Resident Ordinary) Account. An NRE account allows you to transfer funds to another NRE account as well as an NRE to NRO fund transfer.
Let’s get to the crux of the NRE and NRO Account to understand about their usage and benefits in detail:
- Non-Resident External (NRE) Account: The NRE account can be opened for the purpose of maintaining the income earned outside India with tax free interest (up to 7.75%*). In case of an NRE account, both the principal amount and interest earned are completely repatriable from India.
- Non-Resident Ordinary (NRO) Account: The NRO account can be opened for the purpose of maintaining the income earned in India by NRIs, such as income from rent, dividends, pension, etc. The repatriation of the money in the account can be done up to a maximum of 1 million USD per financial year. Note: 30% tax + surcharge + education cess will be deducted at the source of interest earned in India
Also read: NRE VS NRO: Selecting the Right Bank Account for NRIs
| Factors to consider | Non Resident External (NRE) Account | Non Resident Ordinary (NRO) Account |
|---|---|---|
| Purpose | For income earned outside India | For income earned from India (pension, rent etc.) |
| Currency | INR | INR |
| Joint Account Holder | Only NRIs | Both NRIs as well as Residents |
| Interest | Up to 7.75%* | Up to 7.75%* |
| Repatriation (transfer of money from Indian bank account to foreign bank account) | Both Principal (money invested initially) and Interest completely repatriable | Up to a maximum of 1 million USD per financial year |
| Tax Deductions | No tax | Tax on Interest earned (not on principal amount): 30% tax + surcharge + education cess will be deducted at the source of interest earned in India |
Also Watch: What is NRE Account | What is NRO Account
Benefits of NRE/NRO Account for NRIs/OCIs
| Non Resident External (NRE) | Non Resident Ordinary (NRO) |
| -Park money earned abroad and earn tax-free interest up to 7.81%* -24*7 withdrawals using International Debit Cards –Invest in opportunities such as Mutual Funds, IPOs etc. -Link NRE Account to a PIS Account and trade in Indian stocks -Convenient Banking Experience -Repatriate funds abroad fully and freely | -Maintain the income generated in India from sources such as pension, rental income etc without any hassle -Earn interest on the funds in the account up to 7.30%* -Invest in opportunities such as Mutual Funds, IPOs etc. -Link NRO Account to a PIS Account and trade in Indian stocks -Convenient Banking Experience |
Also Watch: Best NRI Bank Account to understand the benefits of every NRI Banking Account variant and NRE to NRO Fund Transfer.
NRE to NRO Transfer Tax
There are no taxes on NRE to NRO Transfer. You can transfer money to NRO Account without any hassle. Although, the funds lying in the NRO Account are liable for taxes. To know more about taxation on NRO Account, and get taxation advisory from experts at SBNRI, click in the button below.
Along with understanding the fundamentals of NRE and NRO Bank Accounts, NRIs often confuse the major process and ask some questions that are repeated often but to no avail.
In the upcoming segment, we will try to address these questions put up by NRIs.
Documents Required for NRO to NRE Funds Transfer
When you are transferring money from NRO to NRE account you need to gather all the important documents like:
- Form 15CA and 15CB: These are crucial documents for tax compliance.
- NRO to NRE Transfer form: NRIs/OCIs need to fill out the NRO to NRE transfer form and submit it to the bank to transfer funds.
- Identity and address proof: Valid Passport/ OCI Card/ PIO Card, Address proof of both India and Overseas.
- Bank statement: Statement of your NRO account to prove the source of the fund.
- A signed cheque for the transfer of funds from the NRO to the NRE account.
- FEMA (Foreign Exchange Management Act) declaration.
- Documentary proof of source of funds.
What is Form 15CA and 15CB for NRIs?
According to the Income Tax Act, any payments made by a resident to a non-resident must be disclosed. The purpose behind tax deduction at source and subsequent reporting is to ensure timely tax collection. Form 15CA serves as a declaration filed by the individual remitting the money, affirming that the payments made to the non-resident have been appropriately taxed.
On the other hand, Form 15CB is not a declaration but a certificate issued by a Chartered Accountant. This certificate guarantees that the provisions of the Double Taxation Avoidance Agreement (DTAA) and the Income Tax Act have been duly adhered to concerning tax deductions while making the payments.
Permissible Sources of Funds for Online Transfer from NRO to NRE Funds
The following sources of funds are eligible for online transfer:
- Dividend Income
- Gift from Close Relative
- Income Tax Refund
- Insurance Policy Claim or Maturity Proceeds
- Interest (Earned on NRO Account)
- Interest on Other Securities
- Maturity of Debentures/ Bonds
- Public Provident Fund (PPF) Balances
- Rental Income
- Unutilised Foreign Funds, including funds transferred from NRE SB/ FD
- Sale of property purchased from funds remitted from overseas or NRE/ FCNR accounts
- Sale of property purchased from Rupee Source (while resident in India)
- Funds from Cancellation or Refund of application for Purchase of Property
- Sale of shares or mutual funds
- Repayment of loan from close relative
- Repayment of loan from an individual other than a close relative
Can I transfer money to NRO Account from abroad?
Yes. NRIs can transfer money to NRO Account from abroad. To understand this part we need to explore the permissible credits in an NRO Account.
Credits refer to the money that can be deposited in an account. The permissible credits in an NRO Account are:
- Inward Remittances from outside India
- Interest earned on the NRO account balance
- Gifts in INR or loans taken from any resident or NRE/NRO account holder
- Transfers from your own or any other NRE/NRO account
- Any income generated in India for which the taxes are not deducted at source
Also read: How to convert resident account to NRO account
How to open an NRI Bank Account?
Every major bank in India has its own unique process for opening NRI Bank Accounts. To know about the account opening process of top banks in India, click here.
Also read: 10 Best NRE Accounts in India for NRIs 2024: Online Application
How to repatriate money from NRE Account SBI?
The process of repatriation from all the major banks in India such as SBI, ICICI, HDFC etc. can be understood using the following table:
| Accounts | Process | Limit |
|---|---|---|
| NRE | 1. ONLINE: -Internet banking for outward remittance (sending money to your overseas account from your NRE account) 2. OFFLINE: Fill these 2 forms. (You can get them at the bank branch or download them online, sign them and send them to the bank branch in India via courier in case you are abroad.) -Bank Request Form: Enter foreign currency/inr amount to be repatriated, beneficiary bank details (the beneficiary name can be same or different) -Form A2 (Form for remittance) | No Limit |
Also read: SBI NRO to NRE Fund Transfer: Step-by-Step Process
Can I transfer money from NRO Account to Foreign Bank?
The process of transferring money from NRO Account to foreign bank is called Repatriation. The process for the same is as follows:
| Accounts | Process | Limit |
|---|---|---|
| NRO | All the following documents are needed to be submitted at the Bank Branch (in India). You can either submit it when you arrive here or download it online and send the signed copies to bank branch via courier: -Form 15CA (The purpose of this document is to ensure that taxes are collected on the funds before they are remitted abroad as it becomes difficult to recover taxes at a later stage) (Fill the form online on NSDL and print the acknowledgement) -Form 15CB (Certificate of an Accountant) (The Accountant fills the form and shares it with the account holder. The account holder then sends it to the bank via courier) -Form A2 (Form for remittance) -Request Form from the Bank (for details to debit funds from your account) | USD 1 million |
How to transfer money from NRO to NRE Account in ICICI?
To transfer money from NRO to NRE Account in ICICI or any other top bank in India such as SBI, HDFC etc. you need to provide proper documentation stating that all the taxes are paid on the funds being transferred to the NRE Account because both the principal and interest earned on NRE Deposits are fully and freely repatriable.
Transfer of funds between these accounts are subject to taxation. Only after you have paid all your taxes on the funds in NRO Account, can you transfer it to the NRE Account.
Also read: Axis Bank NRO to NRE Fund Transfer: Step-by-Step Process
Contact SBNRI
If you have any queries regarding the process of repatriation through outward remittance from India to abroad and the tax angle associated with it, ask our tax expert now using the button below. Also, visit our blog and YouTube channel for more details.
FAQs
What is the process for NRO to NRE fund transfer?
- Yes, it is possible to transfer but it is governed by RBI guidelines.These guidelines are:
- Quantum transfer of money: Money transfer limit per financial year is USD 1 Million.
- Tax compliances: Any tax on the amount in NRO should be paid before transfer.
- Form 15CA AND 15CB: Mandatory certificates required by the Income Tax Department of India.
What is the limit of NRO account transfer?
- The transfer limit is USD 1 million per financial year.
What are the Benefits of an NRE account?
- Access to foreign currency
- Tax-free income
- High security
- Offer competitive interest rates
How can I avoid TDS on my NRO account?
- The NRO account TDS rate is 30%, and it applies directly to the interest earned on the account. If the interest earned on the NRO account is less than Rs. 50,000 in a financial year, then there is no TDS on the NRO account. This means that NRIs with lower income do not have to pay any TDS on their NRO account income.
Can my friend transfer money to my NRE account?
- Yes, NRE to NRE account is allowed like other transactions from self or friend’s account.
Is 15CB required for transfer from NRO to NRE?
- Form 15CB is a certificate issued by a Chartered Accountant. This certificate guarantees that the provisions of the Double Taxation Avoidance Agreement (DTAA) and the Income Tax Act have been duly adhered to concerning tax deductions while making the payments.
Is TDS applicable on transfer from NRO to NRE account?
- No, TDS is not applicable on transfer from NRO to NRE accounts.
