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Navigating Fund Transfers from NRO Accounts

Understanding the Nuances of NRO Account Transactions
min read
February 3, 2024

Navigating Fund Transfers from NRO Accounts

Managing funds in an NRO (Non-Resident Ordinary) account is a common concern for Non-Resident Indians (NRIs) who want to transfer money to their home country or elsewhere. With the combination of regulations from the Reserve Bank of India (RBI), tax implications, and foreign exchange considerations, the process can seem daunting. This detailed guide aims to demystify the process for NRIs looking to transfer funds from an NRO account.

What is an NRO Account?

An NRO account is a type of bank account available to NRIs, facilitating the management of income earned in India such as rent, dividends, pensions, or other sources. It's important to note that while these accounts can be convenient for local transactions, there are certain restrictions when it comes to international fund transfers.

Eligibility and Account Opening

Opening an NRO account is relatively straightforward. NRIs, PIOs (Persons of Indian Origin), and OCIs (Overseas Citizens of India) are eligible. The account can be opened with foreign currency or Indian Rupees, and the process includes a KYC (Know Your Customer) verification.

Types of NRO Accounts

There are various forms of NRO accounts including savings, current, fixed deposits, and recurring deposits. Each comes with its own set of features tailored to different financial needs and investment timeframes.

Limits and Regulations for Fund Transfer from an NRO Account

NRO account holders can repatriate up to USD 1 million per financial year out of the balances in their NRO accounts. However, this is allowed after applicable taxes have been paid in India, and a clearance has been obtained from a chartered accountant in the form of Form 15CA and 15CB.

Understanding Tax Implications

Unlike NRE (Non-Resident External) accounts, funds in an NRO account are taxable in India. The interest earned is subject to TDS (Tax Deducted at Source) and account holders must also comply with Indian tax laws in terms of income tax.

Process to Remit Money Overseas

Initiating a transfer involves furnishing necessary documents and ensuring all tax compliances are met before funds can be moved to a foreign account. The process also often involves a conversion of Indian Rupees (INR) to the desired foreign currency.

Steps for Transferring Money

Transferring money from an NRO account involves understanding the regulatory framework, tax compliance, and operational procedures of the banking institution being used. Here is a step-by-step guide:

Accumulate and Prepare Documents

Gather all necessary documents required for the fund transfer, including identity proof, account statements, and tax clearance certificates, such as Form 15CA and 15CB.

Calculate Taxable Amount and Pay Taxes

Determine the taxable amount on the funds to be transferred and ensure the payment of taxes to avoid any legal issues or penalties. Make sure to receive an acknowledgment from the IT department.

Fund Conversion and Transfer Request

After tax compliance, request your bank to convert the INR to the desired foreign currency. Submit a request to transfer the funds, and your bank will process it according to their procedures and FEMA guidelines.

FAQs related to transfer money from an NRO Account

Q1. What documents are required to transfer money from an NRO account?

Submit application, RBI Form A2, Forms 15CB/15CA, PAN, proof of fund source, and passport copy for transferring money from NRO account.

Q2. How can I transfer funds from an NRO to an NRE account?

For NRO to NRE transfers, provide signed cheque, FEMA declaration, fund source evidence, and complete CA Forms 15CA/15CB.

Q3. What is the process for repatriating funds from an NRO account?

Repatriation from NRO requires Forms 15CA/15CB, Form A2, bank request with a yearly limit of USD 1 million for smooth processing.

Q4. Are there tax implications for transferring money from an NRO to an NRE account?

Transferring from NRO to NRE necessitates tax payment verification, needing a CA's certification to ensure compliance.

Q5. What benefits does transferring money to an NRE account offer?

Transferring to NRE account offers unlimited transfers, diverse transfer methods, high interest rates, and tax benefits.

Q6. How long does it take to remit funds from an NRO account?

Remittance time from NRO varies with bank processing and regulatory adherence; liaise closely with your bank.

Q7. Can I deposit into an NRE account from India?

Deposits into an NRE account are permissible only from overseas or from an NRO account, under specific guidelines.

Q8. What are the tax deductions on an NRO account?

Interest from NRO accounts attracts a 30% tax plus cess, deducted at source based on income generated in India.

Q9. Can both NRIs and resident Indians hold a joint NRO account?

NRIs and resident Indians are eligible to jointly hold an NRO account, offering flexible banking solutions.

Q10. What types of accounts are available for NRIs?

NRIs can choose between NRE for foreign income and NRO for income earned in India, catering to different financial needs.

Arnav is a dedicated product leader with a passion for finance and fintech. He graduated from IIT Bombay and IIM Calcutta and heads the Product team at Vance. He has extensive experience in the financial sector, with a deep understanding of the cross-border space. In his free time, he enjoys playing the guitar, rock climbing, and training for triathlons.

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