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.

What Is an NRO Account?

In essence, an NRO account is a way 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.

What’s the Difference Between an NRO and an NRE Account?

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.

Essential Rules for Transferring Money from NRO to Foreign Accounts

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:

1. Repatriation Limits: NRIs are generally allowed to repatriate up to $1 million per financial year from their NRO accounts. This restriction applies only to non-current income, generally taken to mean income from gifts, loans, or sale of assets, etc. There is no upper limit on repatriating current income funds, which can include income from dividends, pensions, salary, interest, etc.

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2. Tax Implications: Repatriation of funds from an NRO account is subject to Indian taxes, particularly if the funds represent capital gains or other taxable income. The bank, before submitting the required documentation to the RBI, needs to confirm that all applicable taxes and dues are cleared on the fund being sent. This may require you to furnish certain documents, explained below.

Documents for Overseas Fund Transfer from NRO Account

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.

Best Practices for Foreign Remittance from an NRO Account

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.

Final Words

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.