How to Transfer Money from NRO to NRE Account (With RBI Rules)

When you earn in India but live abroad, your money often ends up split between two accounts: NRO (Non-Resident Ordinary) and NRE (Non-Resident External). As good as the NRO account may be for handling domestic earnings, it is taxable and has limitations on repatriation. This is why most NRIs prefer to transfer funds to their NRE account, where the funds are free from taxes and transmittable abroad with ease.

But how do you really make that switch?

In this blog, we'll guide you through the why, what, and how of remitting money from your NRO to NRE account. You'll know just what to do, what documents to have ready, and how to comply.

• NRO to NRE transfer is allowed as per RBI regulations. With up to USD 1 million repatriation limit per financial year, this transfer consolidates your savings into a fully repatriable account, making it easier to manage your funds overseas. 
• Any earnings kept in NRO accounts will attract TDS (Tax Deducted at Source) before being credited. Your bank may ask for Form 15CB and Form 15CA if the amount is large. These forms verify tax compliance and transfer the amount quickly. 
• Smaller transactions or some exempted incomes, such as monthly rent or dividends, may not need Form 15CB or Form 15CA. Nevertheless, it's best to verify with your bank in advance whether your transfer complies with RBI as well as tax regulations.

An NRO (Non-Resident Ordinary) account offers a convenient way of receiving and managing money earned in India, even when you're outside the country. For example, managing rent from a property, dividends from investments, or pensions paid in India when you're living in the U.S.

Here are some key features of an NRO account:

• It's an INR-denominated account, meaning deposits and withdrawals are made in INR.
• Foreign currency and Indian remittances can be deposited, but every withdrawal is always made in INR.
• The funds in this account are taxable in India, and you will have to bear the taxes on the income you earn here.
• Repatriation (remittance abroad) is permitted, but up to USD 1 million in a financial year, if you follow RBI guidelines and pay taxes as per applicable rules.

An NRE (Non-Resident External) account is used for parking your foreign income in India. This is the account you take when you want to bring money from abroad into India and yet make it flexible and repatriable.

The main features are:

• It's also a rupee-denominated account, but allows only foreign currency deposits.
• The principal as well as the interest is repatriable, i.e., you can send them abroad without any restrictions.
• Your money in the NRE account is completely tax-free in India - no taxes on the interest or principal.
• It gives you the freedom to use your money in India or send it abroad whenever you want.

An NRO to NRE transfer enables you to move funds from your NRO account (which contains your India-based income) to your NRE account (which is tax-free and repatriable in full).

Why is this important?

• Your NRO account income is subject to tax and has limits on how much you can remit overseas.
• By transferring eligible funds to your NRE account, you not only make them more easily repatriable but also get tax exemptions on future interest.

Although your NRO account is convenient for handling income earned in India, it is subject to tax charges and repatriation restrictions. That is why most NRIs prefer to remit money into an NRE account. 

Here’s why you might consider doing the same:

• To convert your Indian earnings into foreign exchange for foreign expenses or investments.
• To reserve your NRO account for receiving Indian earnings while utilizing your NRE account for money with complete repatriation freedom.
• To have access to your money in foreign currencies when required.

To remit money into Indian investments, such as mutual funds, more effectively through your NRE account.

Step 1: Confirm eligibility

RBI regulations (under FEMA) allow only specific types of income. These are:

• Rental income from Indian property
• Dividend income from shares or mutual funds
• Pension
• Sale proceeds of property or other assets
• Interest on deposits

It's also necessary that these funds are earned legally and are fully tax-paid in India. Let's say you've sold a flat in Bangalore. If you want to transfer the proceeds to your NRE account, you'll need to produce the sale deed and pay any capital gains tax due.

Step 2: Get your tax clearance

RBI requires that the transfer can only be done after clearing the taxes, and this is attested by Form 15CB, which is given by a Chartered Accountant (CA). The CA checks the source of your income, verifies if the applicable taxes have been paid, and then attests it in Form 15CB. Without this attestation, your bank will not process the transfer.

Step 3: File Form 15CA online

Log in to the Income Tax e-filing portal and file Form 15CA. This is basically you, the account holder, reporting the remittance details.

Now, Form 15CA has four parts (Parts A-D), but not all are applicable to all transfers. For an NRO to NRE transfer, these are the most applicable:

• Part A: Applied when the remittance is less than ₹5 lakhs in a financial year. For smaller transfers such as monthly rent income or dividends, filing Part A is sufficient.
• Part B: Applied when the remittance is more than ₹5 lakhs in a financial year and a CA certificate in Form 15CB is obtained. This is the most typical situation for property sale proceeds or bigger transfers.

Parts C and D are applicable when tax is not payable (due to special orders or exemptions), so they are not typically applicable to NRO to NRE transfers.

After you file Form 15CA online, you'll get an acknowledgement slip.

Tip: Download the acknowledgement and keep a copy, as your bank will request it before processing the transfer.

Step 4: Collect supporting documents 

In addition to these forms, your bank will request other documentation, such as a FEMA (Foreign Exchange Management Act) declaration. This is a straightforward form in which you attest that the transfer is in accordance with FEMA and RBI regulations. Having these in hand beforehand saves you from unnecessary delays.

Step 5: Submit everything to your bank

Once your documents are in order, submit them to your bank (the Authorized Dealer (AD) under RBI regulations). The bank will review each form, cross-check the source of funds, and verify that your request falls within RBI’s rules.

Your bank may also ask clarifying questions. For example, if the amount is large, they may want to double-check the sale deed or tax payment challans.

Step 6: Bank processes the transfer

Once the bank is satisfied, it will make the transfer. The amount is deducted from your NRO account and transferred to your NRE account. The processing time depends on your bank.

Keep in mind, the NRO to NRE transfer limit is USD 1 million per financial year. If your remittance falls within this limit, and the documents are correct, the process is generally smooth.

Step 7: Enjoy full flexibility with your funds

Once the money is in your NRE account, it is freely repatriable. That is, you can remit it overseas, invest in India, or just keep it for your own use, without any restrictions.

Each NRO to NRE transfer is strictly overseen by RBI regulations, FEMA announcements, and Income Tax compliance, with banks serving as gatekeepers.

1. RBI regulations

• The Reserve Bank of India (RBI) allows transfer of only specific kinds of income (like rent, dividends, interest, or proceeds of sale of assets) from an NRO to an NRE account.
• There’s a USD 1 million annual limit for repatriation as per the RBI’s notice issued in 2012, provided it is documented.
• The bank makes the transfer only after ensuring adherence to these RBI regulations.

2. FEMA declaration

• The remittance is governed under the Foreign Exchange Management Act (FEMA), 1999.
• An NRI has to file a declaration (through Form 15CA) that the remittance is in compliance with FEMA as well as tax laws.
• For most cases, a Form 15CB certificate by a Chartered Accountant is also required, certifying that taxes have been paid as due.

3. Income tax compliance

• The NRO account income can be charged with Tax Deducted at Source (TDS).
• The CA certificate guarantees the remittance does not escape any Indian tax dues before sending money abroad or to an NRE account.

4. Security and fraud prevention

• Banks conduct stringent KYC (Know Your Customer) checks to verify the source of funds declaration.
• Property sale deeds, rent receipts, or statements of dividend can be requested.
• These measures protect NRIs and stop the remittance system from being exploited for illicit operations.

When you initiate an NRO to NRE transfer, your bank will request certain documents to comply with RBI and Income Tax rules. Although requirements may vary slightly between banks, the essential set of documents typically consists of:

1. Application form

A bank form/transfer request, where you fill in details of the transaction (amount, source of funds, destination account, etc.).

2. FEMA declaration

A straightforward declaration (usually in the bank's format) stating that the transfer is in accordance with FEMA guidelines and RBI regulations.

3. Form 15CA (Income tax declaration)

Submitted online on the Income Tax e-filing portal by the account holder. It is a self-declaration of the nature and details of the remittance.

4. Form 15CB (CA Certificate)

A Chartered Accountant Certification to confirm that:

• The income is transferable.
• Taxes have been paid or deducted (including TDS).
• The remittance is compliant with Indian tax regulations.

5. Proof of source of funds

Based on the income to be remitted, banks might request:

• Property sale deed: If the funds are from the sale of property.
• Rent agreement and rent receipts: For rental income.
• Dividend or interest statements: For investment income.
• Pension order/statements: For pension income.
• Identity and account proofs.
• Self-attested copy of passport/OCI/PIO card.
• PAN card copy.

NRO and NRE account details (usually through cancelled checks).

When you shift your money from an NRO to an NRE account, it becomes versatile, tax-effective, and globally tradable. Here's why you should consider an NRO to NRE transfer:

1. Full repatriation of funds

An NRE account gives you unrestricted right of repatriation. This means, the money can be repatriated any time to support a family member, invest overseas, or simply park it in an offshore account. 

2. Tax efficiency

The money in your NRO account is taxable in India. However, when they are transferred to your NRE account, neither the principal nor interest received is subject to tax in India, making it easy to handle your international finances.

3. Consolidation of Indian income

If you have multiple income streams in India (rent, dividends, or property sale), the NRE account helps consolidate them. It makes it easier to monitor and manage multiple income sources when they’re all consolidated in one repatriable account.

4. Compliance and assurance

Your NRO account requires constant oversight of tax filings and documentation. By shifting money to your NRE account, you keep them in check and free from issues, and your mind can be at peace.

5. Improved global access

Your NRE account offers global access via internet banking and overseas debit cards. That is, your Indian earnings are as hassle-free as your domestic earnings, no matter where you are in the world.

6. Easier wealth planning

In the event of planning for an estate or inheritance, having your funds consolidated in an NRE account is an advantage. Since the money is already repatriated, it's easier to manage and distribute at the time of need.

While remittance of money from an NRO to an NRE account has obvious advantages, the process is complicated with issues that can be confusing and slow down progress. For example, complex documentation, tax compliance issues, bank-specific requirements, time-consuming processes, transaction limits, and regulatory interpretations.

1. Complex documentation

An NRO to NRE transfer involves a lot of forms and documentation, as we've seen above. Keeping track of all this paperwork can feel overwhelming, especially if you’re not in India.

2. Tax compliance issues

Since transfers require proof of tax payment in India, any gaps in tax compliance can delay the process. For example, if your CA finds that taxes weren’t deducted correctly, you’ll need to settle that before moving forward.

3. Bank-specific requirements

While RBI guidelines are standard, different banks will have their own checklists of documentation and internal verification processes. This means extra paperwork or longer verification periods.

4. Time-consuming process

From coordinating with your CA to filing online forms and sending everything to the bank, the whole process can take a week or more. When there are errors or lacking documents, the holdups could take even longer.

5. Transaction limits

The RBI has set the NRO to NRE transfer limit at USD 1 million per year. For NRIs who have more assets or income from different sources, this limit can, at times, be constraining.

6. Regulatory interpretations

Since the regulations are stated under RBI and FEMA, they tend to be complicated or subjective at times. NRIs who are not well-versed with the nuances may have to solely depend on their bank or CA, and that can create confusion.

By having the proper preparation and approach, you can make the transition easy and hassle-free. Consider the following best practices:

1. Stay updated on RBI guidelines

RBI oversees procedures and guidelines governing NRO to NRE transfers. Staying updated on the new guidelines saves you from surprises and maintains compliance.

2. Work with a reliable Chartered Accountant (CA)

As Form 15CB and occasionally sections of Form 15CA need a CA's signature, the right choice would be someone familiar with NRI transactions. A good chartered accountant will advise you on tax deductions, documentation, and the specific forms you should submit.

3. Organize documents early

Gather sale deeds, rent agreements, dividend statements, and other supporting documents beforehand. Don't miss including your FEMA declaration form. You needn’t go back and forth with the bank.

4. Work closely with your bank

Each bank has its own checklist and turnaround time. Check with your relationship manager before initiating the process about the necessary documentation and bank-specific requirements as a head start.

5. Plan around timelines

Transfers may take a few working days, sometimes a little more if clarifications are required. If you know that you will require funds overseas by a particular date, plan the process well in advance.

6. Keep tax records safe

Always maintain copies of your submitted Form 15CA, Form 15CB, acknowledgement slips, and bank letters. You can use them for any tax or compliance-related questions in the future.

7. Use transfers strategically

When you have more than one source of Indian income, it's usually easier to transfer them jointly. This minimizes paperwork and simplifies the whole process.

Once you’ve managed your NRO to NRE transfers, you’re not done yet. Chances are, you’re also dealing with other international receivables, earnings from global clients, freelancing platforms, or overseas businesses.

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