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The banking options in India for Non-Residential Indians (NRIs), Overseas Citizens of India (OCIs), and Persons of Indian Origin (PIOs) include opening an NRO or NRE account. These accounts can help them manage their money in India, which may include a host of activities like pensions, gifts, dividends, rent, or income from the sale of assets. While banks can readily provide information regarding the opening of an NRO account, the process of foreign remittance from an NRO account requires a bit more consideration.
This article provides a comprehensive overview of the regulations and processes involved in foreign remittances from an NRO account. Firstly, let’s start with what an NRO account is.
an NRO account is a type of bank account specifically designed for NRIs to manage their Indian-sourced income while complying with Indian tax laws. These accounts are maintained in the Indian currency (INR) and are generally used to deposit and manage income earned within India.
While you can repatriate funds from an NRO account, there are certain limits and conditions in place. Generally, you can repatriate up to $1 million per financial year after paying applicable taxes.
As mentioned earlier, an NRO account is mainly used for income generated within India in Indian currency. An NRE account on the other hand is used for income generated outside India. It is used by NRIs to store their foreign currency income, after conversion to Indian rupees. Many banks allow NRE accounts to be held in any foreign currency of choice.
The other major difference between NRO and NRE accounts is that there is hardly any restriction on transferring funds from NRE accounts. These accounts are also exempt from Indian tax laws. NRO accounts on the other hand have to comply with all Indian tax laws, while also having limits placed on the total amount of non-current income that can moved outside of India.
Transferring money from an NRO account to a foreign one is relatively simple, as your bank is expected to deal with most of the documentation. However, there are certain rules & restrictions that you need to be wary of:
Foreign Exchange Management Act (FEMA):
The Foreign Exchange Management Act (FEMA) constitutes a critical element of India's overall foreign exchange management framework. In the case of outward remittance, FEMA regulations are very relevant to NRIs, OCIs, and PIOs who want to send money from India to other countries. FEMA provides that the Reserve Bank of India (RBI) is responsible for foreign exchange dealings and for the regulation and supervision of the transactions. FEMA provides limits and conditions on repatriation in the case of Non-Resident Ordinary (NRO) accounts. As mentioned, these restrictions state that the repatriation of income that is current in nature, such as dividends, pensions, and salaries, is completely permissible with no cap, however, the repatriation of other non-current income like gifts, loans, and proceeds from selling assets is limited to a total of USD 1 million per financial year.
Income Tax Act:
From a legal perspective, the consequences of failing to adhere to tax obligations can prove to be costly in terms of both time and money. For the owners of NRO accounts, the income generated through interest on the account is liable to Indian taxation. Similarly, any capital gains that are obtained from the sale of assets located within India are also subject to taxation. These tax responsibilities must be taken into account before making any outward remittance. To facilitate expenditure out of India, the account holder is required to acquire a certificate from a Chartered Accountant in Form 15CB. This signifies that the applicable taxes have been paid on the amount that is sought to be transferred. This Outward Remittance Certificate is mandatory for banks to ensure compliance with the taxation requirements under the Income Tax Act. Following these considerations enables NRO account holders to avoid complications from the Income Tax Department.
When transferring money from your NRO account to a foreign destination, you'll need to provide certain documents to your bank. These documents help ensure that your remittance complies with Indian regulations and that the transfer process is smooth.
Outward Remittance Application: This is a standard form that you'll need to fill out, providing details about the transfer.
Form A2: A mandatory form required by your bank, detailing the purpose, amount, and other crucial details regarding the remittance.
Form 15CB: A certificate from a Chartered Accountant confirming that the necessary taxes have been paid on the amount being remitted.
Form 15CA: A declaration form that you, as an NRI, must submit to the Income Tax Department.
Copy of PAN Card: A photocopy of your Permanent Account Number (PAN) card is required for identification.
Depending on your bank and the specifics of your transaction, you might need to provide additional documents, such as proof of the source of funds.
When it comes to sending money abroad from your NRO account, following best practices can save you time, money, and potential legal hassles. Here are some things to keep in mind -
Keep documentation ready: Ensure you have all the necessary documents mentioned above ready before initiating the transfer.
Make sure all taxes are paid: This is really important as funds in an NRO account are subject to Indian tax laws
Choose an Authorized Dealer: For a quicker transfer, use banks authorized by the RBI. They typically don't need special RBI approval for transfers under $1 million and handle most due diligence themselves.
Transferring funds from an NRO (Non-Resident Ordinary) account to an NRE (Non-Resident External) account is possible but subject to certain conditions.
Assuming both your NRO and NRE accounts are with the same bank, here is a step-by-step process for transferring money from your NRO to your NRE account:
Step 1: Obtain CA Certificate (Form 15CB)
A Chartered Accountant (CA) verifies that applicable taxes on the funds have been paid and issues Form 15CB as proof.
Step 2: Fill Form 15CA
This form is a self-declaration submitted online via the Income Tax Department portal, confirming that you are transferring taxed money.
Step 3: Submit Forms to the Bank
Provide Form 15CA, Form 15CB, and a written request to transfer funds from your NRO to NRE account. Some banks may also ask for additional KYC documents.
Step 4: Bank Verification & Transfer
The bank will review your documents, ensure compliance with RBI regulations, and process the transfer. Once approved, funds are credited to your NRE account.
This process allows you to repatriate your India-earned income abroad while benefiting from tax-free interest and currency conversion flexibility.
Foreign remittance from an NRO account is a simple way of moving funds outside of India. But it is subject to various restrictions and documentation. Karbon uses SWIFT and WIRE transfers to provide an alternative to this lengthy process, where you can begin making your first transfer within 2 hours. Check out our page on outward remittance for more information.
No, the NRO account is only meant to manage Personal Indian earnings like rent, pensions, or dividends. If you plan to conduct business transactions, then you will have to open an additional account labeled as a business account under FEMA regulations.
If you need to repatriate over $1 million, you’ll need special clearance from the Reserve Bank of India (RBI). While your bank will assist you with the procedures, the approval lies solely with the discretion of the RBI.
Yes. The panic and crime spreads when there are funds with tax obligations, these need to be settled before remittance. The Income Tax Department can fine the aggrieved parties or scrutinize their tax legalities.
No, remitting from an NRO account without a PAN card will not be possible. As mandated by Indian tax laws, a PAN is necessary for tax compliance. Generally speaking, the transfer will not go through without a PAN.
Yes, you need to submit Form 15CA to the Income Tax Department for every remittance. If the amount exceeds a certain limit, Form 15CB from a Chartered Accountant is also required.
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