Since the significant announcement by the Reserve Bank of India on May 7, 2012 NRIs can transfer their money from the Non-Resident Ordinary Account (NRO) to Non-Resident External Account (NRE).
The Reserve Bank of India (RBI) permitted NRO to NRE fund transfer subject to payment of applicable taxes within the overall ceiling of USD 1 million in a financial Year .
Prior to 2012, sending money to NRE account from NRO account was not permitted by RBI. The only way to transfer the amount into NRE accounts was through release from abroad or another NRE account.
The proclamation by the RBI is plainly good news for NRIs looking forward to transferring their money to NRE accounts, which are repatriable in foreign currencies. This change has helped NRIs to save transaction cost. However, there are certain conditions that have to be met before transferring the amount.
The NRO Bank Account is mainly used for depositing Indian incomes (only in INR) like dividends, rent or incomes through any investment or sale of a property. In case of NRO account both non-resident and resident can become joint account holders.
The NRE Bank Account is mainly used for depositing income (in Foreign Currencies like USD, Euro,) from abroad. In case of NRE account, only NRIs can become joint account holders.
Difference between NRO and NRE account is that the NRO account is opened by an NRI in India and used to deposit his incomes earned in India; whereas an NRE account is opened by an NRI in India and used to deposit his incomes earned overseas.
A lot of NRIs are using this privilege; still, a few NRIs are facing difficulties transferring their money from NRO to NRE account. This is mainly due to lack of awareness about the process of how to transfer money from NRO to NRE account which is not so complex. Below are a few conditions every NRI must know about transfer of funds from NRO to NRE.
To transfer money from an NRO account to an NRE account, you should know the following rules and stick with them to avoid any trouble.
To transfer your money from NRO to NRE account, NRIs need to submit the following documents,
Decreasing value of rupee incited RBI to exempt interest rate on NRE deposits in December 2011. This change has propelled NRIs to save their funds in NRE deposits , as they are tax-free and freely repatriable. Here, reparation means you are free to move your money to your overseas account.
It is beneficial for NRIs to repatriate money since at the time of excess movement (constructively) in the currency exchange rate you can make money by transferring the amounts to your overseas financial account.
Transfer of money from NRO to NRE account can be useful to save some tax on the interest earned.
Do you know the difference in the tax treatment for interest earned on an NRE and NRO account? Yes! Both accounts have different rules. Read on:
It is now possible for NRIs to transfer funds from NRO to NRE account subject to certain conditions and guidelines mentioned above. Read and understand the conditions carefully before transferring your funds. In order to avoid financial ambiguities, one is advised to get in touch with a financial expert to clear all the doubts.
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Sir,
Please clarify. In the past, I sent money from Australia to either NRE or NRO account directly. Secondly, transferred money from NRE to NRO account (Self). Source of money was given to relatives (my brother-in-law to study in India and Overseas support). In addition, I lend money to my brothers. After 10 years, I am getting back the money. By showing the source of funds (evidence), is it repatriable?
Yes, funds in your NRO account from repayments by relatives can be repatriated if you provide evidence of the original source and purpose (like loans to family). You must complete Form 15CA/15CB and adhere to RBI guidelines. Annually, up to $1 million can be repatriated after paying applicable taxes. Documentation and bank approval are crucial to validate the repatriation process.
Good Work, however any fund lying in NRO Account, for which proof of source of fund is available can be transferred to NRE Account.
There is no restriction on source of fund is repatriable or not.
When you say "source of funds in NRO account should be repatriable", what does it mean? NRO funds are by definition non-repatriable. That is the biggest difference between NRO and NRE account. Can you kindly clarify?
That's if the funds that has come to the NRO account has got a source - that can be repatribale. If you are buying a property from your NRE funds and selling it later. That sale proceeds are in your NRO account. Then that has a source which can be repatriable. Hope this clarifies.
Good to read.
Nicely explained!
Dear PBTIKAIT,
Thanks a lot
Ramalingam
Very interest, I didn't know about all these details.
Lot of information in an easy way to understand.
Good work.
Thanks a lot
You are welcome
Great Text! I like your posts. You provide Very informative content