How to Transfer Funds from an NRO Account to an NRE Account?

Open an NRI Savings Account

Key Takeaways: The complexities involved in transferring money between an NRO and an NRE Account can seem baffling. Is the NRO to NRE transfer tax compliant? Are there any laws governing the same? Can funds be smoothly transferred from an NRO Account to an NRE Account? Here are the answers you seek.

Introduction

15.85 million Non-Resident Indians (NRIs) reside outside India, as reported by the Ministry of External Affairs.

These millions of NRIs have built new lives abroad, contributing to their adopted countries' growth while supporting their homeland through remittances. However, amidst pursuing their dreams and settling into life overseas, managing finances across borders presents a significant challenge.

One such challenge involves navigating fund transfers between bank accounts in India. NRO and NRE Accounts are crucial for NRIs, yet understanding how to transfer funds between them can be confusing.

This guide will explain the process of transferring funds from an NRO Account to an NRE Account, helping you navigate this aspect of your financial life as an NRI.

What is an NRO Account?

Non-Resident Ordinary (NRO) Accounts help you access and manage income earned in Indian rupees, such as rent, dividends, or other income sources like profits from investments or property sales in India. These accounts can have both non-resident and resident Indians as joint holders, and they allow income to be received in any currency, whether Indian or foreign.

However, withdrawals from NRO Accounts are limited to Indian rupees only. The funds in these accounts are usually associated with income or profits generated within India and are not freely transferable to other currencies or countries. Additionally, the interest earned on balances in NRO Accounts is subject to taxation.

What is an NRE Account?

An Non-Resident External (NRE) Account is a specialised bank account offered by Indian banks to NRIs to manage their foreign currency earnings. This account helps NRIs deposit their foreign income easily and enjoy tax exemptions on the funds deposited and the interest earned within the account. Moreover, NRIs can freely transfer funds and interest back to their foreign accounts without restrictions.

NRIs can open an NRE Savings Account individually or jointly with another non-resident Indian. Moreover, they can conveniently invest in mutual funds online through their NRE Accounts.

Some of the key features of NRE Accounts include:

• Exclusively designed for depositing foreign currency earnings.
• Allows free repatriation of funds and interest to the NRI's foreign account.
• Provides tax exemption on the interest earned within the account.

Reasons for transferring funds from an NRO to an NRE Account

Here are some reasons one might consider transferring funds from an NRO to an NRE Account:

• You may need to convert your Indian income into your preferred currency for investments or expenses abroad.
• Opting for an NRE Account enables you to manage investments with full repatriation flexibility while keeping an NRO Account solely for collecting Indian income.
• If you require access to funds in currencies other than Indian Rupees, transferring them to your NRE Account could be the best solution.
• You can use an NRE Account to invest in India across mutual funds, offering a hassle-free way to manage your investments.

Other NRE Account benefits include:

• No limitations:

  Foreign Exchange Management Act (FEMA) does not impose any maximum ceiling on the amount you can transfer from an NRE Account. As the money deposited in an NRE Account is earned outside India, it is freely repatriable.

• Preferential rates on remittance:

  Better currency conversion rates are applicable whether you send money to India or repatriate funds abroad from your DBS Treasures NRE Account.

• Tax benefits:

  Income earned in the accounts is exempt from income tax and balances exempt from wealth tax

• Smooth Global Transfers:

  You can easily and securely transfer funds globally via the internet and mobile banking services.

Open an NRI Savings Account

How Do You Transfer Money from an NRO to an NRE Account?

Transferring money from an NRO Account to an NRE Account in India involves a few steps and some documentation. Here’s how you can do it:

1. Gather Documents:

   Before initiating the process, you need these necessary documents:

   • A signed cheque to authorise the NRO to NRE transfer of funds
   • FEMA declaration (provided by your bank)
   • Documentary evidence of source of funds (salary slips, rent receipts, investment statements etc.)
   • Form 15CA (filled online and printed)
   • Form 15CB (if needed)
2. Initiate Transfer with Bank:

   Fill out and submit the bank's transfer request form or provide a signed cheque to your bank.

3. Provide Supporting Documentation:

   Submit the FEMA declaration and documentary proof for the source of funds.

4. Declare Tax Compliance:

   File Form 15CA to declare you have paid your taxes. (Note: make sure to pay the necessary taxes before transferring funds from an NRO to an NRE Account)

   Follow the below steps to file Form 15CA:

   • Begin by opening the Income Tax India website (www.incometaxindiaefiling.gov.in.)
   • Log in via your User ID (PAN) and password.
   • Upon successful login, navigate to the ‘E-file- Prepare and Submit Online Form (Other than ITR)’ option.
   • Choose the Form 15CA from the available options. (Read the provided instructions for filling out the form. It consists of four parts: Part A, Part B, Part C, and Part D. Fill out the section(s) that are relevant to your situation.)
   • Once you’ve filled the form, review and submit it.
   • Take a printout of the form and print the acknowledgement slip.
   • Sign the filled-out form and submit it to the bank in duplicate.

   Get assistance from a Chartered Accountant (CA) to understand and comply with the process, if needed.

   In certain situations, Form 15CB may be required, which is certified by a Chartered Accountant (CA). This form includes information about the payment, such as the TDS (Tax Deducted at Source) rate, deductions, and the applicability of DTAA (Double Taxation Avoidance Agreement).

5. Bank Verification and Processing:

   After filling the forms, your bank will verify all documents and process the transfer.

Final Note: If you want access to your Indian funds at any time in any currency, then transferring funds from an NRO to an NRE Account makes sense. However, to manage your India expenses, you may want to keep funds in an NRO Account itself.

Whether you are looking to open an NRO or NRE Savings Account or seamlessly transfer funds, you can benefit from DBS Treasure’s NRI banking services. Additionally, you have an option to choose between Growth Plus NRE/NRO Account and Growth Max NRE/NRO Account, each tailored to meet your specific needs.

Still, if you need any assistance, feel free to reach out to us.

Frequently Asked Questions

1. Can NRIs transfer funds from an NRO to an NRE Account?

   Yes, NRIs can transfer funds from an NRO Account to an NRE Account. The Reserve Bank of India permits such transfers of up to USD 1 million annually.

   Here's a list of documents NRIs need for an NRO to NRE transfer of funds:

   • A signed cheque to authorise the transfer of funds from NRO to NRE Account
   • FEMA declaration
   • Documentary evidence of source of funds
   • Form 15CA
   • Form 15CB (if necessary)

2. Is there an exemption limit on the income earned in an NRO Account?

   Yes, there is an exemption limit on the total income earned in India by an NRI in a financial year. If the NRI's total income in India is below this limit, they are not required to pay tax. The current exemption limit is ₹2.5 lakhs or ₹3 lakhs for individuals below 60 years. However, even if the income is below the limit, NRIs with NRO Accounts may still need to file an income tax return to claim a refund of any TDS deducted from the interest earned in the account.

3. Can I transfer funds from a normal Savings Account to an NRO Account?

   Yes, you can transfer funds from a normal Savings Account to an NRO Account and vice versa.

Open an NRI Savings Account