A lot of NRIs have shown interest in transferring funds from NRO to NRE since the notification came out on May 7, 2012. However, very few have actually transferred funds. This is mainly due to the lack of awareness or experience in newly issued notification in case of NRIs, Banks as well as Chartered Accountants. Additionally, most of the queries from NRIs have been for the procedural aspects only.
After successfully helping my clients in transferring funds from NRO to NRE, based on my experience, I have summarized the procedures in 4 simple steps as follows:
1. Obtain Chartered Accountant (CA) Certificate in Form 15CB
- Select and Consult a Chartered Accountant
- Explain your situation
- Provide documentation/explanations
- CA will verify the source of funds and whether income tax is deducted and/or paid
- On verification, CA will issue certificate in the prescribed Form 15CB
2. Submit Form 15CA online
- Access www.tin-nsdl.com
- Click “Services” and then “Form 15CA”
- Read Guidelines and familiarize with Form 15CA requirement
- Click “Form 15CA (Online Filing)” in the Forms section
- Fill up all the information as required
- Click “Proceed”
- Please review the details and then confirm to upload the form electronically
- On Confirmation, the form is electronically submitted to the Income Tax Department
- Form 15CA with an Acknowledgement No. is generated
- Print and sign the form
3. Submit documents to Authorized Dealer/Bank where NRE accountis kept
- Form 15CA
- Form 15CB
- Check (cheque) or Demand Draft for the amount
- Request letter or Form as per respective bank’s requirement
- Complete any other document, requirement or formality
4. Transfer: On verification of submitted documents, Bank will process the transfer and credit NRE account.
Obtaining CA certificate is the most important and most time consuming step. Each CA will have his/her own procedures to verify the source(s) of funds and whether source is tax exempt and/or income tax is paid. Once you complete Step # 1 (obtain CA certificate in Form 15CB), other steps could be completed within a day and mostly the same day.
The key thing in verifying the source is determining the sources of funds. For Example, if you have a NRO FD of 3 years maturing on July 31, 2012. Source of fund is not NRO FD matured on which TDS deducted but it consists of 1. Principal when FD was made in 2009 and 2. Interest on the Principal from 2009-2012. Interest on NRO FD is considered current income and is taxable in India. While TDS could be deducted on Interest (current income), it is also important to verify the source of Principal. The CA certificate includes verification of all sources of NRO funds.
Things to consider/remember:
- Every bank’s process and procedure for transferring funds from NRO to NRE is different so it is advisable to inquire, know and understand the procedures of the bank with which you have NRE account.
- Filing Form 15CA is very important as the form is electronically submitted to the Income Tax department. Any error could generate an inquiry from the Income Tax department.
- As Part B of the Form 15CA is filled based on CA Certificate issued by the Chartered Accountant in the Form 15CB, experience of a Chartered Accountant in dealing with NRIs and issuing CA certificate especially for NRO to NRE transfer should also be considered.
- Even though RBI issued the notification allowing transfer from NRO to NRE on May 7, 2012, there is still lack of awareness among bank employees of the procedures and/or requirements. E.g. Bank employees may not know the BSR code of their own branch and could take few hours to a day to respond. Please note that BSR code of bank branch is a basic requirement (more than 3 years old) for any remittance, irrespective of the purpose and to be included in #4 of the Form 15CB whereas this notification came out less than 3 months ago. So, it is important to work with a knowledgeable bank person or have someone to liaison with the bank and/or have patience.
In summary, Nothing should deter you from transferring your funds from NRO to NRE account. My advice is to transfer funds from NRO to NRE as soon as possible to enjoy 5 benefits and reduce tax drag with the help of your experienced Chartered Accountant.
Please note that the rules and forms for the transfer have been revised via CBDT circular 67 dated Sept 2, 2013. For more information, users comments and my answers/explanations, visit my blog “15CA/CB rules revised Again: 15CA/CB May NOT be required for NRO to NRE transfer”
The rules and procedures have been revised again. For the latest procedures and requirement as on April 1, 2016, please visit my recent blog 15CB, 15CA Procedures Updated: Understand new procedures applicable from April 1, 2016.