Too many questions surround the aspect of NRO to NRE Fund Transfer and make up the doubt pool of NRIs. The concept of NRO to NRE Money Transfer requires knowledge of both these NRI Banking Accounts in particular and understanding the underlying aspects associated with the fund management of these accounts. So, in this article we will guide you through the prospect of fund transfers from NRO to NRE Account.
Fund transfer from NRO to NRE Account: Can an NRI do that?
Yes! An NRI can transfer funds from NRO to NRE account after providing 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.
Another doubt that can arise here will surround the topic of NRO to NRE Fund Transfer Limit. Is there any fund transfer limit while transferring funds from NRO to NRE. If so, what is it? We will cover this aspect in the next segment.
NRO to NRE Fund Transfer Limit
You can repatriate funds from NRO accounts only up to a maximum limit of USD 1 million per financial year as allowed by Reserve Bank of India (RBI). The funds are not freely repatriable. The interest earned on NRO Deposits is taxable in India at 30% along with surcharge and education cess deducted at the source of interest earned in India.
To understand in detail about the aspect of NRO to NRE Money Transfer, we need to go through an overview of these accounts.
What is NRO and NRE Account: An Overview
Let’s get to the crux of the NRO and NRE Account to understand about their usage and benefits in detail:
- Non-Resident Ordinary (NRO) Account: The NRO account can be opened for the purpose of maintaining the income earned from India such as income from rent, 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
- 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 (upto 7.95%*) on Fixed Deposits. Both the principal amount and interest earned are completely repatriable from India.
| Factors to consider | Non Resident Ordinary (NRO) Account | Non Resident External (NRE) Account |
|---|---|---|
| Purpose | For income earned from India (pension, rent etc.) | For income earned outside India |
| Currency | INR | INR |
| Joint Account Holder | Both NRIs as well as Residents | Only NRIs |
| Tenure of Deposits | 7 days to 10 years | 1 year to 10 years |
| Interest | Up to 7.30%* | Up to 7.81%* |
| Repatriation(transfer of money from Indian bank account to foreign bank account) | Up to a maximum of 1 million USD per financial year | Both Principal (money invested initially) and Interest completely repatriable |
| Tax Deductions | Tax on Interest earned (not on principal amount): 30% tax + surcharge + education cess will be deducted at the source of interest earned in India | No tax |
Benefits of NRO/NRE Accounts for NRIs
| Non Resident Ordinary (NRO) | Non Resident External (NRE) |
|---|---|
| -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 | -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 |
How to open an NRI Bank Account?
Every major bank in India has its own unique process for opening NRI Bank Accounts. Here is a grid with the process to open NRI Bank Accounts in the top banks of India: View Grid
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
Can I transfer money from NRO Account to foreign bank?
The process of transferring money from NRO Account to foreign bank is called Repatriation. A similar question put up by NRIs is “How to repatriate money from NRO Account”. Mentioned below is the process, limit and the documents required for fund transfer from NRO to NRE Account:
| 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 |
NRO to NRE Fund Transfer: FAQs
NRO to NRE Fund Transfer in Axis bank can be done after providing proper documentation stating that all the taxes are paid on the funds being transferred to the NRE Account.
NRO to NRE Fund Transfer in ICICI bank can be done after providing proper documentation stating that all the taxes are paid on the funds being transferred to the NRE Account.
NRO to NRE Fund Transfer in ICICI bank can be done after providing proper documentation stating that all the taxes are paid on the funds being transferred to the NRE Account.
Yes. Your parents can deposit money in your NRO Account as gifts in INR or loans taken from any resident or NRE/NRO account holder is allowed in an NRO Account.
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