How to transfer funds from an NRO to an NRE Account?
Previously, the RBI prohibited the transfer of funds from an NRO account to an NRE account. There are many instances in which you may be required to transfer money to an NRE account.
NRIs manage their costs in India using the Non Resident External (NRE) account and the Non Resident Ordinary (NRO) account. Most banks provide the ability to transfer funds from an NRO account to an NRE account.
What is NRO and NRE account?
The NRO account is largely used to deposit funds received through real estate investments and sales, as well as dividends, rent, and other sources of income produced in India. Joint accounts may be opened by both residents and non-residents.
Most money from outside the country goes into the NRE account. NRE accounts and joint account ownership can only be opened by NRIs.
According to a RBI notification dated May 7, 2012, “it has been decided that NRIs as defined in Foreign Exchange Management (Deposit) Regulations, 2000 contained in Notification No. FEMA.5/2000-RB dated 3rd May 2000, as amended from time to time, shall be eligible to transfer funds from NRO account to NRE account within the overall ceiling of USD 1 million per financial year, subject to payment of tax, as applicable (i.e. as applicable if funds were remitted abroad). Such credit of money to an NRE account will be recognised as an admissible credit under clause 3(j) of Schedule-1 of Notification No. FEMA.5/2000-RB dated May 2000.”
Previously, the RBI prohibited the transfer of funds from an NRO account to an NRE account. The only way to shift funds into NRE accounts was via a transfer from overseas or another NRE account.
There are several instances in which you may be required to transfer cash to an NRE account. To pay for investments and expenses abroad in your chosen currency, you may need to transfer and withdraw your Indian rupee earnings. It is feasible that you should maintain an NRO account just for the purpose of receiving Indian income and manage all of your assets in an NRE account so that you have the option of repatriating all of your funds when you need them.
Transfer limit from an NRO to an NRE account
The Reserve Bank of India permits an annual transfer of up to USD 1 million from an NRO account to an NRE account.
List of documents required to transfer funds from NRO to NRE accounts
IDFC FIRST Bank lists the documentation needed to transfer money from an NRO to an NRE account.
- A signed cheque for moving money from an NRO account to an NRE account
- FEMA declaration
- Source of funding supported by documentation
- Form 15CA
- Form 15CB – This is a CA-approved form. It includes information on the payment, such as the TDS rate, deductions, and DTAA applicability.
Interest generated on NRO accounts is taxable. However, interest paid on NRE accounts is exempt from taxation. Prior to moving funds from an NRO to an NRE account, it is essential to pay the applicable taxes.
How to move money from an NRO to an NRE account?
Here’s how the IDFC FIRST Bank says you can transfer money using Net Banking. It’s easy to move money from an NRO account to an NRE account when you have the IDFC FIRST Bank on your side. Follow these steps for a smooth transfer of funds.
- Log in and click ‘PAY’.
- Pick your NRO savings account by clicking “Transfer to NRE”
- Select from the drop-down menu the NRE account for credit and source of funds.
- Enter amount and attach necessary supporting documentation
- Accept the terms of service and enter the OTP to confirm your payment request.
Once all documents are authenticated, the funds will be transferred.
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