RBI allows transfer from NRO to NRE account

As per RBI’s notification RBI/2011-12/536 dated May 7, 2012, NRIs are eligible to transfer funds from NRO account to NRE account within the overall ceiling of USD one million per financial year subject to payment of tax. Such credit of funds to NRE account shall be treated as eligible credit.

I believe it is really helpful for both Indian Government and NRIs. 

Indian Government:
Bank FD interest on NRE and NRO are same around 9.5%; however, interest on NRE FD is TAX FREE whereas NRO FD is TAXABLE. As NRIs may not get any interest if FDs are withdrawn before 1 year, they have no choice but to keep money in NRO FD. However, on completion of 1 year, NRIs will not keep invested in NRO FD but will rush to break FDs to remit money out of India for investing back in NRE FD. And, money once gone, may not return. This will drive demand for dollar and could accelerate rupee depreciation. So, to stop that and keep money in India, RBI allowed transfer of money from NRO to NRE.

NRIs:
While it is helpful to Indian Government, it is more beneficial to NRIs. Following are the key 5 benefits to NRIs:
1. Save transaction cost: No need to transfer money from NRO to foreign currency and from foreign currency to NRE if you want to transfer funds from NRO to NRE for taxfree interest

2. Increase your return: Interest on NRO is taxable in India whereas interest on NRE FD is tax free in India, saving tax of 15-30% and no TDS based on DTAA rates.

3. No TDS, No need for Tax Residency Certificate (TRC) (introduced in Finance bill 2012 for TDS on NRO funds at DTAA rates) and no need to file Income Tax return in India as interest on NRE FD and bank accounts are tax free in India

4. You decide when and how much you transfer your funds out of India: Currently, whenever you want your funds back out of NRO, you file Form 15CA, get CA certificate in 15CB and then after completing procedures, remit funds. You may follow the same process for transferring from NRO to NRE but you have full freedom to transfer money out of NRE account whenever you want in future be it partial or full and whether next day, month or year.

5. Limit: There is an overall ceiling of $1M for remittance out of NRO per year. The limit also apply for transfer from NRO to NRE but you don’t need to convert them in foreign currency immediately and keep funds in NRE account. There is no limit for remittance out of NRE account. So after 5 years, when you think foreign exchange is in your favour e.g. Rs40/$, you can convert all $5 million, significantly improving your return.

Please also review related blogs about “Understand Tax Drag and why transfer” and “Procedures for Transferring funds from NRO to NRE”.

About Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)

Mr. Jigar specializes on NRI Investments and Taxation. He is proud to be one of only 21 CFA Charterholders in India working as consultants. (In 2011, when he became CFA Charterholder, out of 97,173 CFA Charterholders in the World, only 697 Charterholders were in India and only 3% work as consultant; Source: www.newcfa.org). He received his MBA (Finance) from University of Illinois, Chicago, USA, CPA from USA and a Chartered Accountant from India. Jigar has over 15 years of professional experience including more than 4 years with KPMG USA’s Risk Advisory Services. Currently, he provides Wealth Management and taxation consulting serving clients from USA, UK, Americas, Europe, Middle East, Asia, Africa, Australia and India.
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46 Responses to RBI allows transfer from NRO to NRE account

  1. sharma dk says:

    whether form a-2 also to be submitted in the Bank while getting my funds transferred from nro to nre a/c?

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Form A2 is just an application cum declaration by the person is usually required for any transfer / remittances out of India. As NRO to NRE transfer may also be regarded as transfer out of India as there is no restrictions/limits on transfer of NRE funds abroad, It may be required. It just tells bank the reason/nature of transfer, that it is within limit and as per RBI/FEMA and there is nothing to worry about. Thanks.

  2. poornima says:

    Hi
    I came to know that recently RBI has sent circular regarding NRO account holders that they cannot receive any overseas amt or withdraw any amt from their account till election i.e 12th may. Is it true?
    Thanks
    poornima

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      I am not aware of such circular. I don’t think RBI can limit withdrawal from bank account. Instead, they may ask if caught with cash to prove the source and if you explain and has proof that it was withdrawn from bank, it would be okay. Anyway, if you know such circular, please email it to me at jigar@nareshco.com. Thanks.

  3. Francis Edwin says:

    Dear Sir

    I am given to understand that conversion of NRO FD fully funded from abroad does not need to go through the 15ca / 15cb route. It is only if amounts in the NRO account have been funded locally that one needs to use the two forms. ICICI also does not need 15ca/cb for such a transaction. Please enlighten me as most Branches have never seen a single transaction of such nature thus far. Pl see point 2 of Documents Required in the following ICICI format http://www.icicibank.com/nri-banking/pdf/Request_Letter_for_Transfer_29.pdf.

    Thanks. F Edwin

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      It is great that ICICI has agreed for no documentation for NRO to NRE transfer for FDs made out of NRE funds. This will solve many issues. My interpretation of the CBDT circular is that 15CB/15CA not required for any NRO to NRE transfer provided the funds for family maintenance and savings as it is included in the specified list, as a customer, you are at the mercy of the bank as they have the power. You may try to convince them 15CB/15CA not required but if they are adamant, you may have to give as it is you who want to move money from NRO to NRE. Please check my blog “15CA/CB rules revised Again: 15CA/CB May NOT be required for NRO to NRE transfer” and 140+ comments. Thanks.

  4. Dominic says:

    Hi Jigar

    Can I transfer my NRE Fixed Deposits proceeds , maturing after my return to India,(after my becoming Resident Indaian) to my son’s NRE Account who continues to be NRI ?

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      You can transfer your funds in NRE account to RFC account on return to India. And, you can transfer the funds in RFC account to your son’s NRE account as a Gift. Thanks.

  5. Sankar says:

    I transferring my monthly salary through exchange from Dubai to my SB a/c in India. If I send more than 10 Lakhs to my SB A/c was Taxable by IT.

  6. kaushlendra kumar says:

    First of all thanks for this Article.

    Plz let me know after notification 67/2013, it is necessary to file 15CA & 15CB to convert NRO to NRE A/C. If no then what is the procedure to convert the same.

  7. akhtar says:

    Dear

    I have saving account in ICICI Bank And transfer money from oman more than 7 lakhs is it possible
    or open NRI Account.

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Yes, you can open both NRO and NRE account with ICICI or any other bank.

  8. SK Arora says:

    Dear Sir
    Some time back I transfered my salary earned abroad to my savings account with SBI & this account was converted to NRO account. Major portion of this money ( money remitted from abroad ) was put in a NRO FD. In case I break my NRO FD and transfer funds to my NRE account & if intrest earned for FY 2012-13 on NRO FD is less than 2 lacs in India and there is no other income in India, can 30% TDS deducted by bank be claimed back by filing return in India.

  9. Vishal says:

    Dear sir,

    I would like to get my NRO funds converted to NRE funds and would like to use your services to assist me.
    Currently I am paying TDS at 15% (Canada) and was wondering what the TDS rate would be if I break my FD (i do not have the residency certificate). Would I have to pay 30% since the beginning of my FD, or would it be from May 2012 when the new bill was introduced in the budget?
    Thank you for your help.
    Vishal

  10. Dipen says:

    Hi Jigar,

    At present US $ is getting stronger (almost Rs.60). Is it good time to convert Resident bank account into NRO and then NRE account? Do I need to break my FDs held in Resident bank account to convert into NRO account?

    Thanks in advance,
    Dipen

  11. prahallad behera says:

    I am currently staying in US and have an NRE account in India.Is there any such limit to transfer USD to my NRE account?

  12. SURESH NANDHA says:

    i have a fd in sbi nro account now i have to transfer fd from nro to nre i have filed the 15 ca form i want to know my nro & nre bank are same so the form i filed up the information of remitance that address should be the ass who stays in dubai the remiter and remitance address should of dubai only particulars of remitance and tds sbi bank or wat pls help me out my fd is going to mature in 29-07-2014

    thks

  13. KVR Jain says:

    Hi Jigar,

    I have kept some amount as fixed deposit in my fathers name in India.

    I have both NRE & NRO a/c. Can i transfer the amount from my fathers normal s/b a/c to my NRO a/c & then transfer it to my NRE a/c for a fixed deposit.

    Your quick resonse is higly appreciated.

    V/r
    Jain

  14. Rajan says:

    I am an NRI US citizen. Recently I inherited Rs 1. crore from the sale of family property towards my share . Out of this amount I have invested Rs 50 lakhs in Capital Gains account with REC Bonds and The balance Rs 50 Lakhs are in my NRO savings account with a Bank in India . I have also paid Income tax on the Income from the proceeds of my share of the property. I would like to transfer Rs 50 lakhs in my NRO account to a NEW NRE account which I shall open .
    My question is any tax ie applicable on the proposed Transfer . Please advise
    RAJAN

  15. Krishna says:

    I want to sell a property after holding it for 10 years and want to use the money to pay part of my Overdraft loan (against NRE-FD). What is the best way to do it? Can I directly deposit it to my Overdraft current a/c?

    Since I would be using the income generated to pay off another loan, are there any any tax implications? Any form like 15ca/cb to be filled (assuming I use NRO a/c)?

    Thanks

  16. Harish says:

    Can you provide some guidelines how to repatriate INR to USD from NRE account.
    I tried moving money from NRO to NRE and ICICI Bank doesn’t allow. Have the banks already implemented the rule that was introduced in May 2012 for moving money from NRO to NRE?

    Appreciate your comments.

    Rgds,

    Harish

  17. saty says:

    Thanks a lot.

  18. satyen says:

    Dear Jigar,

    I hope Form 15CB will be filled by my CA.
    I have gone through the forms online and found it little difficult to fill Form 15 CA.

    Part B of the form – Amount of remittance in foreign currency as i have repatriated the funds long ago.
    Amount of TDS / Rate of TDS / amount of remittance after TDS etc.
    also points 12 to 16 are confusing. (I am in Oman & a salaried person)
    Can you help.?
    Regards
    Satyen

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Hi Satyen,

      If you read carefully, Part B is to be completed based on 15CB issued by CA. So, do not worry. You may also ask your CA to fill up Form 15CA on your behalf in a template and after review, you fill it online accordingly.

      I hope this was helpful.

      Regards,
      Jigar

  19. PARTH SHAH says:

    Dear Jigar,
    First of all thanks a lot for such a wonderful article.
    I have read somewhere that for Form 15CB, the remittor and benificiary need sot be be different person. However if one transfer funds from NRO A/c from NRE A/c which are in the same bank, then both remittor and beneficiary will be the same person. In such case how will the form be filled?

    Regards

    Parth

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Parth,
      There is no such requirement. Anyway, you do not have to worry as your CA will know how to fill up the 15CB.
      Thanks for your comment.
      Regards,
      Jigar

  20. Jagdish says:

    Dear Jigar,

    Firstly, thank you very much for crating this informative blog which is providing very very useful information about transfer of NRO to NRE and also for the responses given by you against the queries raised. I do have one query as under :

    I am holding NRE and NRO account with State Bank of India. Till today, what i have done is i have sent all money from abroad to my NRE saving account only and made all NRO FD’s. NRO FD’s were made by SBI by transffering money from my NRE saving account and not from any other account / source.

    Now, i want to transfer money from NRO FD’s to NRE FD’s. Considering the fact that my NRO FD’s were made by transferring money from my NRE account only and even, SBI can also verify the same at their end from my NRE saving account transaction details; do i have to submit form 15CA and 15CB ? Is it mandatory to submit form 15CA and 15CB OR i have to submit only signed FEMA declaration and Undertaking to SBI ?

    Please reply as soon as possible.

    Regards,

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Dear Jagdish,

      For transferring money from NRO to NRE, it is mandatory to submit 15CA and 15CB as there is no restriction on remittance out of NRE account. You need to follow procedures as if you are transferring money out of India.

      Thanks for your comment. I really appreciate it.

  21. Gaurav Jain says:

    Dear Jigar,

    If a NRI wants to engage in Futures trading, then broker has told me it is done by transferring funds from NRE account to NRO to broker account and vice versa to transfer funds back overseas. Now, is the money earned from Futures trading taxable in India? I will be transferring funds back to Australia so question is if income earned is taxable in India, will I have to pay tax again in Australia? I have heard of Double Taxation Avoidance treaty between India and Australia but I am not sure it it applies here.

    Thanks.
    Gaurav

  22. saty says:

    Dear Jigar,

    1. Is it advisable to transfer funds by breaking the FD?
    2. Does SBI charge any transfer fees?
    3. How fast will the bank transfer it?
    4. Where can i get Form CA & Form CB?
    5. if FD broken before maturity will it be still taxed?
    6. I have given a self declaration on NRO a/c to SBI about DTAA, what will be my TDS?
    thanks
    Sat

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Dear Sat,

      Thanks for leaving a comment.

      1. For most of investors, Yes. However, in your case, I can suggest only after looking at your situation.
      2. SBI does not charge any transfer fees. However, there may or may not be penalty for pre-mature withdrawal of FD.
      3. Transfer completed on the same day bank receives Form 15CB, 15CA and request letter or any other documents, if required.
      4. Form 15 CB – Get it from Chartered Accountant, Form 15CA – to be filed online at http://www.tin.nsdl.com
      5. Interest until breaking FD calculated and TDS deducted on the interest.
      6. From 2012-13, self declaration may not be sufficient. TRC – Tax residency Certificate may be required to deduct TDS at DTAA rates. Please contact your bank for details

      Let me know if you have any question.

      Thanks,
      Jigar

  23. Jigar Parekh says:

    thanks

  24. Jigar Parekh says:

    Dear jigarbhai

    Nice to read your article, it’s very informative.

    Query:

    transferring fund from NRO to NRE can only be done with the funds lying in NRO FD or can NRI also do the same with the MF investments done with NRO status?

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Transfer is from NRO bank account to NRE bank account. Sale proceeds of MF investments credited to NRO account are also eligible for conversion into NRE account subject to conditions.

  25. Pingback: RBI allows transfer from NRO to NRE account 3: Procedures for Transferring funds | Naresh J. Patel & Co, Chartered Accountants

  26. shanky says:

    Hi Jigar,
    1. Yes, I understood benefit #4 and #5. In fact I have already thought about making use of #5 as USD has appreciated at the moment and domestic deposit rates are high. In a few years time when rupee starts to appreciate, it makes sense to repatriate it significantly increase the return. (say $100, convert today at 55, deposit for 2 years at 10% and repatriate it back at 40 Rs/$ will give you approx 32.5% return)

    2. I had a fixed deposit that paid me an interest of Rs. 3 lakhs. Tax has been deducted at source already at 10% i.e. 30k. I will be filing a return next year with deductions under 80C to claim this 30k back fully from IT department. The question I had was whether there will be any tax/charges at the time of repatriation of the funds to a foreign account i.e say when $ is around 40 rs in the above example?

    Thanks for your replies and insights.

    Shanky

  27. shanky says:

    Hi Jigar,

    Yes I understand, allowing tranfer to NRE account means you keep the deposit in rupees, meaning you dont sell INR to buy USD (which would devalue the currency even further).

    I was under the impression that the funds in NRO are non-repatriable. Atleast, that is what I have been told by the banks in India. Also, I was under the understanding that the 1m$ ceiling we are talking about applied to transfer from NRO to NRE account and not for remittance from NRO to abroad, as stated in the RBI circular dated 7/5/12

    http://rbi.org.in/scripts/NotificationUser.aspx?Id=7180&Mode=0

    A couple of more queries:

    1. Do you suggest filing the form 15 CA/B online on
    https://onlineservices.tin.nsdl.com/TIN/JSP/tds/enterForm15CA.jsp?

    Banks do want to see Form 15CA, CB before they can move the money from my NRO to NRE

    2. If I am an NRI and have a rupee fixed deposit with a bank and the interest amount has been taxed already at the statutory 10%, do you think when I move the money from NRO to NRE account, do I need to pay any additional taxes?

    Regards
    Shanky

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Hi Shanky,
      1. Please read the notification, benefit #4 and #5 twice to understand the changes from the notification.
      2. Form 15CB to be obtained from a Chartered Accountant in physical form (It is a certificate signed by CA). Form 15CA must be filed online by you and then printed and signed. Both 15CB and 15CA to be submitted to bank for transfer
      3. While you may be in 10% tax bracket, TDS on interest in your case from April 1, 2012 (assuming you have not submitted TRC to bank) would be 30.9%. You may claim the difference but for that you need to file tax return in India and refund will take about a year or more.
      4. There is no additional tax on transfer of funds from NRO to NRE.

  28. shanky says:

    Hi Jigar,

    Nice article. Two queries:

    You mentioned – “However, on completion of 1 year, NRIs will not keep invested in NRO FD but will rush to break FDs to remit money out of India for investing back in NRE FD”
    How is this possible. NRO deposits are non-reptraiable i.e. cannot be moved out of
    India.
    The only way we can move funds from NRO is convert the funds into $ currency/DD for moving out to a foreign bank account and then remitting it back to NRE Rupee account or Foreign currency ($ account) account in India.

    2. Currently under the new regulation, do I need to furnish Form 15 CA, CB for moving my money from NRO to NRE even if its within the limit of USD 1m?

    Thanks
    Shanky

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      Shanky, Thanks for your comments. See below for my answers.
      1. NRO funds upto $1 million can be remitted abroad. Had RBI not allowed transfer from NRO to NRE, a lot of NRIs would have remitted abroad and again remitted from abroad to NRE account to earn tax free return. There is no point of keeping money in NRO account earning same return as NRE and pay tax or deal with banks for TDS, TDS certificates, Income Tax Returns, whether TDS is showing in 26AS, etc.
      2. RBI allow NRIs to remit funds abroad upto US $1 million per year. 15CA/CB is required to confirm and/or verify that remittances do not exceed $1 million. You CAN NOT remit more than $1 million per year from NRO account.
      Thanks.

  29. mo says:

    I have some NRO FDs in a bank. I wish to take advantage of the allowance by RBI to transfer money from NRO FD to NRE FD. My deposits are yet to mature but have already run for 2 yrs. How can I convert the NRO FD’s to NRE FD?
    Please let me know the process and forms that need to be filled in.

    Thanks and regards,
    Mo

    • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

      The process and form will depend on the bank with which you have NRO FD. Normally, you can not convert your NRO FD into NRE FD. You have to break NRO FD and transfer balance into NRO savings account. Thereafter, you need to obtain a certificate from Chartered Accountant in Form 15CB and submit Form 15CA. Only on submission of 15CA, 15CB, application and other forms depending on the bank and NRO check (cheque), you can transfer the funds. Thanks for reading our blog and posting comment.

  30. Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

    Please see my another blog that explains why NRIs should transfer funds from NRO to NRE account http://nareshco.com/blog/?p=229

  31. Rajiv says:

    Could you please let me know whether you could do the needful for my NRO and NRE account with a SBI Branch in Haryana? Please mail me at r____@gmail.com

    • Rita Vijay says:

      Dear Mr. Jigar Patel
      Please advise me regarding my NRO Fixed Deposit Tax Deduction.
      My Principal Amount was Rs. 29,54,550/- Maturity Amount Rs. 37,94,389/-
      duration of FD 1000 days at the rate of 9.25 % .
      The Bank has given me Rs. 36,01,000/- . As I am residing in Kuwait according to DTAA , I am supposed to pay 10 % Tax on my interest (Every year I have submitted my DTAA and PAN card details also) but I feel they have deducted much more than 10 % .
      Kindly tell me how much amount should I get after Tax Deduction.
      Thanks and regards
      Rita

      • Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India) says:

        While India and Kuwait has DTAA, you may not be able to get the benefit as since last 2 years, TRC (Tax Residency Certificate) would be required to get the DTAA benefit of 10%. Unfortunately, NRIs from GCC countries, where there is no income tax, TRC may not be issued and as a result, you may not claim the DTAA benefit of TDS @ 10%. In your case, TDS @ 30.9% (30% tax + cess) would be deducted. Without the exact date of FD, I may not be able to calculate the exact amount. You may also ask the bank to provide the details and the TDS certificates. Please note that, you may claim the refund of any additional tax deducted by bank back from the income tax department after filing your tax return. The last day of filing tax return for the financial year 2011-2012 is March 31, 2014. Let us know if you want our help in this. Thanks.

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