Often the NRI account holders feel the need to transfer funds between their accounts. Read on to know if you can transfer funds from your NRO account to NRE account.
The Reserve Bank of India mandates the NRIs (non-resident Indians) to hold a specific type of NRI bank account to manage their earnings in India and abroad. Most Indians living overseas prefer opening a Non-Resident External (NRE) Account or Non-Resident Ordinary (NRO) savings account.
While the NRE account allows you to remit your earnings in a foreign country to Indian banks and hold the deposits in INR, the NRO account permits deposits only the earnings originating in India. Even while you live in a foreign country, you may have a source of income in India through returns from investments, business operations, or rent from real-estate properties. You can keep these incomes safe and secure in an NRO account.
Earlier, many NRI bank account holders often faced difficulties managing their funds as the RBI restricted them from transferring funds from NRO account to NRE account. But, the Reserve Bank of India permitted transfer for funds from NRO to NRE account in its announcement made in May 2012 subject to payment of applicable taxes and a transfer limit of Rs. $ 1 million in a financial year.
Before 2012, the banks did not allow the NRIs to transfer funds from NRO account to NRE account, and the only way you could transfer the amount was either through another NRE account or remit money from overseas. However, in May 2012, the RBI changed the rules and helped the NRIs save the transaction cost.
Today, many NRIs use the fund transfer facility to transfer funds from NRO to NRE account, but still, a few people face difficulties in completing the transaction. This happens mainly because of a lack of awareness about the intricacies of the process involved. Below are a few conditions that you must know about transferring funds.
- You can transfer money from NRO to an NRE account only if the amount is within $ 1 million.
- You are subject to pay taxes for transferring the funds. You can move the funds only if the taxes are clear
- The source of funds in the NRO account must be repatriable
Documents required for transferring funds from NRO account to NRE account
Before you initiate the fund transfer process from NRO to NRE account, you must comply with the documentation process. You must submit Form 15CA (an online application form) and Form 15CB (chartered accountant application) to the bank branch where you hold the account.
Tax rules or NRE and NRO account
The tax treatment for interest earned on the deposits in your NRE account and NRO account is different. The rules are as follows:
- The interest you earn from your NRO account deposits is taxable; TDS (tax deducted at source is applied).
- The interest earned from the NRE term deposit and NRE savings account is tax-free.
So, it is possible to transfer money from the NRO account to the NRE account subject to the above rules and documentation compliance. If you have confusion about the fund transfer rules, it is better to get advice from a financial expert and clear the ambiguities.