How to Transfer Funds From NRO to NRE Account

For Non-Resident Indians (NRIs), managing finances across borders involves understanding Indian bank accounts. Transferring money from a Non-Resident Ordinary (NRO) account to a Non-Resident External (NRE) account is a key financial operation. This process allows for greater flexibility in managing Indian-earned income and preparing it for potential transfer outside the country, requiring adherence to specific regulations.

NRO and NRE Account Repatriation Rules

Non-Resident Ordinary (NRO) accounts manage income earned in India, such as rent, dividends, or pension. These accounts hold funds in Indian Rupees and are generally not fully repatriable. Non-Resident External (NRE) accounts are for foreign earnings and are fully repatriable, allowing funds to be transferred overseas without limits. Money deposited into an NRE account must originate from outside India or be transferred from another NRE or FCNR account.

Transferring funds from an NRO to an NRE account allows an NRI to move Indian-sourced income into an account from which it can be freely sent abroad. The Reserve Bank of India (RBI) permits this transfer, subject to specific regulations. A key condition is a USD 1 million limit per financial year for repatriation from NRO accounts, including principal and interest after applicable taxes. This limit applies to non-current income sources, while current income like rent, dividends, or interest can be repatriated without a specific limit. The annual USD 1 million limit cannot be carried forward.

Information and Documentation Required for Transfer

Initiating a transfer from an NRO to an NRE account requires specific information and documents for compliance. Essential documents include a signed cheque or transfer request form, a FEMA (Foreign Exchange Management Act) declaration, and proof of the source of funds, especially for large transfers.

Documentation involves tax compliance through Form 15CA and Form 15CB. Form 15CA is an online declaration by the remitter, confirming tax payment on the transferred amount. This form helps the Income Tax Department track foreign remittances. Form 15CB is a certificate issued by a Chartered Accountant (CA) verifying applicable tax deductions and compliance with Indian tax laws, including Double Taxation Avoidance Agreements (DTAA).

Form 15CB is mandatory when the aggregate remittance exceeds ₹5 lakh (approximately USD 6,000) in a financial year and is taxable. The CA examines the remittance for tax chargeability before issuing this certificate. Information required for both forms includes remitter and remittee details, remittance specifics, and bank details. Form 15CB must be certified by a CA registered on the e-filing portal.

Executing the Transfer

Once all necessary information and forms, including Form 15CA and Form 15CB, are completed, the transfer process can begin. Banks offer various methods for initiating this transaction, such as online banking portals, branch visits, or specific application forms. Many banks have dedicated online sections for NRI services.

Documentation submission typically involves uploading scanned copies online, mailing physical documents, or submitting them in person. For online submissions, the system may guide the user through attaching necessary files, including the system-generated Form 15CA and the CA-certified Form 15CB. After submission, the bank verifies all documents and processes the transfer.

The bank usually provides a confirmation or reference number. Processing time for NRO to NRE transfers varies, often taking 7 to 15 working days. Factors like bank holidays, time zone differences, or additional clarifications can influence the overall processing time. Banks may follow up if discrepancies or missing information are identified.

Tax Implications and Other Considerations

Funds in an NRO account, including interest, are subject to Indian income tax. All applicable taxes must be paid in India before transferring funds to an NRE account. While NRE interest is tax-exempt in India, repatriated funds may be subject to taxation in the NRI’s country of residence, depending on local tax laws. If the NRI’s country of residence has a Double Taxation Avoidance Agreement (DTAA) with India, tax relief may be available.

Banks typically levy charges or fees for processing NRO to NRE fund transfers, which vary between financial institutions. Foreign exchange rates also play a significant role, as the transfer involves converting Indian Rupees to the foreign currency of the NRE account. Fluctuations in exchange rates can affect the final repatriated amount. It is advisable to monitor exchange rates and inquire about any conversion fees or spreads.

Processing time generally ranges from a few days to around two weeks. Plan transfers in advance, especially for significant amounts, to account for potential delays. Maintaining detailed records of all transactions and supporting documents is important for future reference and tax compliance.