Non-Resident Indians (NRIs) often maintain both NRO (Non-Resident Ordinary) and NRE (Non-Resident External) bank accounts in India to manage their income and savings. While an NRO account is used for managing income earned in India, an NRE account holds foreign income, allowing easy repatriation. Transferring funds from an NRO account to an NRE account can be a smart financial move, provided legal and tax regulations are followed. This guide explains the process, eligibility, and tax implications involved in such transfers.
Understanding NRO and NRE Accounts
-
NRO Account:
Manages income earned in India, such as rent, dividends, and pensions. Funds are repatriable up to certain limits with applicable taxes. -
NRE Account:
Holds foreign income and allows full repatriation of funds without tax liabilities in India.
Why Transfer Funds from NRO to NRE?
NRE accounts allow full repatriation of funds to foreign countries without restrictions. (With the continuous fall in the value of Rupee most NRIs are repatriating the funds outside India).
Interest earned on NRE accounts is tax-free in India.
Consolidating funds in one account simplifies financial management.
Eligibility Criteria for Fund Transfer
NRIs must meet the following conditions to transfer funds:
-
Account Holder Status:
Both NRO and NRE accounts must be held in the same name. -
Fund Source:
The funds must be from legitimate, taxable income in India. -
Compliance:
Satisfy the Reserve Bank of India (RBI) regulations and provide necessary documentation.
Required Documents
-
Form 15CA & 15CB:
Bank insists 15CB certificate from a Chartered Accountant. The certificate contains the details of funds remitted and a confirmation that the funds being transferred are either not chargeable to tax or the tax dues are duly paid and the funds are post tax proceeds. Form 15CA is to be generated from the income tax portal by the remitter through his/her Income Tax login credentials. The form needs to be verified through OTP or Digital signature of the remitter. -
Proof of Fund Source:
Sale of property, redemption of investments, Gifts etc. -
Identity and Address Proof:
Passport and relevant ID documents. -
Declaration Forms:
Bank-specific forms for fund transfer requests.
Step-by-Step Transfer Process
-
Consult a Chartered Accountant (CA):
Seek assistance for tax certification (Form 15CB) and filling out Form 15CA. -
Submit Transfer Request:
Provide the necessary documents to the bank. -
Compliance Check:
The bank verifies documentation and RBI guidelines. -
Fund Transfer Approval:
Upon approval, the bank transfers the funds from the NRO account to the NRE account.
How CA's Can Help
-
Tax Compliance:
Ensure tax filing and correct TDS deductions. -
Credentials Assistance:
Generating login credentials at income tax website, reset Income tax website passwords, obtaining and registering digital signature at income tax website. -
Documentation Assistance:
Help with accurate completion of Forms 15CA and 15CB. -
Financial Advisory:
Provide repatriation strategies and tax-saving guidance.
Conclusion
Transferring funds from an NRO account to an NRE account is a strategic move for NRIs looking to consolidate their finances and maximize tax benefits. Consulting a Chartered Accountant ensures a smooth, compliant, and tax-efficient transfer process. Stay informed and plan wisely to make the most of your overseas earnings and investments.
