Can I Transfer Money From Normal Savings Account to NRO Account?

Cross-border financial management can be complex for Non-Resident Indians (NRIs) who maintain financial ties in India. A Non-Resident Ordinary (NRO) account is a banking tool designed for NRIs to consolidate and manage Indian-sourced income. It enables them to handle various financial transactions in India while residing overseas.

Understanding NRO Accounts

A Non-Resident Ordinary (NRO) account is a bank account held in India, primarily denominated in Indian Rupees, that allows Non-Resident Indians (NRIs) to manage their income earned within India. This income can include sources such as rent from property, dividends from investments, pension, or salaries. An NRI is defined as an Indian citizen or a person of Indian origin who resides outside India for more than 182 days during a financial year. NRO accounts can be opened as savings, current, or fixed deposit accounts, providing flexibility for different financial needs. While both Indian and foreign currency can be deposited into an NRO account, any foreign currency received is converted into Indian Rupees at the prevailing exchange rate.

Permissible Sources of Funds for NRO Accounts

Upon changing residential status to an NRI, existing resident savings accounts must be converted or redesignated to an NRO account, with the funds held within automatically becoming NRO funds. This conversion is a regulatory requirement under the Foreign Exchange Management Act (FEMA). Funds can also be transferred from a Non-Resident External (NRE) account to an NRO account. This occurs if an NRI wishes to consolidate funds or manage foreign-sourced money for use or investment within India. Additionally, foreign currency funds from overseas bank accounts can be remitted to an NRO account in India through banking channels, which are then converted to Indian Rupees. Beyond transfers, NRO accounts are designed to receive income generated in India. This includes rental income from properties, dividends from Indian companies, pension payments, maturity proceeds from investments, and sale proceeds from immovable property or other assets.

The Process of Transferring Funds to an NRO Account

Converting a resident savings account to an NRO account is a procedural step mandated by regulations once an individual attains NRI status. This involves informing your bank about the change in residential status and submitting necessary documentation. Required documents commonly include self-attested copies of your passport and visa to prove NRI status, along with proof of your overseas address and a Permanent Account Number (PAN) card. The bank requires a completed account conversion or re-designation form.

Transfers from an NRE account to an NRO account are simpler and can be initiated through online banking platforms or by submitting a transfer request to your bank. You will need to specify the beneficiary NRO account details, which may include the account number and the account holder’s name. Remitting funds from an overseas bank account to an NRO account in India is done via wire transfer, also known as a SWIFT transfer. To facilitate this, you will need the Indian bank’s SWIFT code, the NRO account number, and the full name of the account holder. Upon receipt, the foreign currency will be converted into Indian Rupees at the prevailing exchange rate before being credited to your NRO account.

Important Considerations and Regulations

Repatriation rules apply to NRO accounts. While the principal amount in an NRO account is not freely repatriable, current income components like interest, dividends, and rent are fully repatriable after paying applicable taxes. For capital income, such as sale proceeds from property or investments, NRIs can repatriate up to USD 1 million per financial year (April to March) from their NRO accounts, subject to tax compliance and necessary documentation.

NRO account funds are subject to Indian taxation, unlike NRE funds. Income earned on NRO accounts is taxable in India as per Indian income tax laws. Tax Deducted at Source (TDS) is applied at a rate of 30%, plus applicable surcharge and cess, on interest income from NRO accounts. Non-Resident Indians may be able to claim benefits under Double Taxation Avoidance Agreements (DTAA) between India and their country of residence, which can reduce their tax liability. To avail DTAA benefits, individuals must submit documents like a Tax Residency Certificate (TRC) and Form 10F to their bank.

Banks require various documents for account conversion or significant transfers to ensure compliance. This includes proof of NRI status, declarations regarding the source of funds, and completion of Know Your Customer (KYC) updates. Adherence to these requirements avoids penalties for non-compliance with regulations.