Can I Transfer Money From NRO Account to Foreign Bank?

An NRO, or Non-Resident Ordinary, account serves as a financial tool for non-resident Indians to manage income earned within India. This includes various sources such as rental income, dividends, or pension payments. While convenient for local transactions and managing Indian earnings, transferring funds from an NRO account to a foreign bank account involves navigating specific regulations. The process requires understanding the permissible limits, preparing necessary documentation, and adhering to established procedures set by Indian financial authorities.

Eligibility and Limits for NRO Account Repatriation

The Reserve Bank of India (RBI) governs NRO account repatriation for non-resident Indians. A key regulation allows for the repatriation of up to USD 1 million per financial year from NRO account balances. This annual limit encompasses both the principal amount and any accrued interest, after all applicable taxes have been paid in India. Any unused portion of this USD 1 million limit cannot be carried forward to the next financial year.

Eligible funds originate from Indian income like rent, dividends, or pension. Current income repatriation, such as interest or rental earnings, is generally permitted within the USD 1 million allowance, provided taxes are cleared. Proceeds from asset sales, like property or shares, also count towards this annual limit.

All funds for repatriation must satisfy Indian tax obligations. Authorized Dealer (AD) Category-I banks, which facilitate transfers, ensure all taxes are paid before processing. Distinguishing between current income and capital proceeds is crucial, as fund nature dictates their impact on the repatriation limit and tax compliance.

Required Documentation for Overseas Transfer

Repatriating funds from an NRO account requires specific documents submitted to the Indian bank. Common requirements include proof of identification, such as a passport, documentation verifying non-resident Indian (NRI) status, and recent bank statements. A Permanent Account Number (PAN) card is also generally required for financial transactions in India.

Tax compliance forms, specifically Form 15CA and Form 15CB, are a significant part of the documentation. Form 15CA is an online declaration filed by the remitter, confirming that the payment being made to a non-resident has been appropriately taxed in India. Form 15CB, conversely, is a certificate issued by a Chartered Accountant (CA) that attests to the tax implications of the remittance. This form ensures compliance with Indian tax laws and, if applicable, Double Taxation Avoidance Agreements.

Form 15CB is mandatory when taxable remittances exceed ₹5 lakh (approximately USD 6,000) in a financial year. The remitter files Form 15CA online via the Income Tax Department’s e-filing portal. A Chartered Accountant certifies Form 15CB, which must be uploaded before submitting Part C of Form 15CA. These forms require information on remitter and recipient details, remittance nature and amount, relevant Tax Deducted at Source (TDS), and any applicable Double Taxation Avoidance Agreement. Banks may also request declarations like an A2 Form and supporting documents to verify fund sources.

Executing the Transfer from Your NRO Account

After meeting eligibility and preparing documentation, initiate the transfer from your NRO account. The process typically begins by contacting your bank in India, which can often be done through their online portal, by visiting a branch, or via email, depending on the bank’s services. Many banks offer online platforms that streamline the outward remittance process.

Submit the completed and certified documents, including Form 15CA and Form 15CB, and any bank-specific declarations like the A2 Form, to your bank. The Chartered Accountant provides the certified Form 15CB, which the remitter uploads to the Income Tax Department’s portal and then submits to the bank. Banks require these forms for compliance with foreign exchange regulations and tax laws before processing.

International money transfers are commonly executed through SWIFT (Society for Worldwide Interbank Financial Telecommunication) transfers. This method is widely used for its security and efficiency in transmitting financial messages between banks globally. To facilitate the transfer, you will need to provide the foreign bank’s details, including its SWIFT code, the beneficiary’s account number, and the beneficiary’s full name and address. After submission, banks typically provide a confirmation receipt and an estimated processing timeframe, which can range from a few business days to a week. The Indian bank will convert the Indian Rupee funds from your NRO account into the desired foreign currency at the prevailing exchange rate at the time of the transfer.

Tax Implications of Repatriating Funds

Repatriating funds from an NRO account involves tax considerations in both India and the country of residence. In India, income earned and held in an NRO account, such as interest, rental income, or dividends, is subject to Tax Deducted at Source (TDS). The standard TDS rate on interest income can be 30%, in addition to applicable surcharge and cess. Non-resident Indians are also generally obligated to file income tax returns in India for any income earned there, irrespective of whether it is repatriated.

When funds are repatriated, they might also be subject to taxation in the recipient’s country of residence, depending on that country’s tax laws. For residents of the United States, for instance, repatriated income could be considered taxable, depending on its nature (e.g., income versus capital).

To mitigate the burden of being taxed on the same income in both countries, India has entered into Double Taxation Avoidance Agreements (DTAAs) with numerous nations, including the United States. These DTAAs aim to prevent double taxation by allowing for reduced TDS rates in India or providing tax credits or exemptions in the country of residence. For example, under the India-US DTAA, an individual earning income in India may receive credit for taxes paid in India against their US tax liability on that same income. Understanding the specific provisions of the DTAA between India and your country of residence is important, and consulting with a tax professional can provide personalized guidance regarding your unique tax situation.