NRO To NRE Fund Transfer – Everything An NRI Needs To Know

1. NRO To NRE Fund Transfer – Everything An NRI Needs To Know For Non-Resident Indians (NRIs), managing money across borders involves more than just banking; it requires navigating complex regulations, currency risks, and tax obligations. While banks handle much of the operational workload, such as account opening, foreign exchange, processing payments, and RBI compliance, transferring funds from an NRO (Non-Resident Ordinary) account to an NRE (Non-Resident External) account is a strategic move in an NRI’s financial journey. If you're planning to repatriate funds or make investments in India on a repatriable basis, understanding how the NRO to NRE fund transfer works is crucial. In this blog, we break down the structure, use, and rules governing both accounts, and how you can shift funds between them efficiently and lawfully. What is an NRO Account? NRO stands for Non-Resident Ordinary account. As the name suggests, it is a bank account opened and maintained by Person Resident Outside India (PROI) or Non Residents under FEMA for carrying out Ordinary or general transactions. Only person resident out of India under FEMA can open NRO accounts. The NRO accounts can be Savings, Current, Recurring or Fixed Deposit accounts. NRO Accounts can be opened as a single holder or as a joint holder with other non- residents or with close relative residents. NRIs, PIOs, OCIs as well as foreign nationals are allowed to open and maintain an NRO account.

2. For example, if Ms. Jyoti, a resident of India, migrates to Canada, becomes a non- resident and informs the bank of her change of status, the bank would re- designate her resident bank accounts as NRO accounts. The resident account is not converted or transferred to NRO but just re-designated as NRO in the banking system and for reporting to RBI. Jyoti would continue to operate and carry out the transactions of the accounts in the ordinary course. While she would get a new NRO cheque book, she may still be able to use her old resident cheque book to withdraw or transfer funds from the NRO account. What is an NRE Account? NRE stands for Non-Resident External account. As the name suggests, it is a bank account opened and maintained by Non-Residents and the primary source of funds is External i.e. out of India. NRIs and PIOs, including OCIs who are PROI or non-resident under FEMA are allowed to open and maintain an NRE account. The accounts can be Savings, Current, Recurring or Deposit accounts and can be opened as a single holder or as a joint holder with other non-residents. RBI has also allowed non-residents to open and maintain NRE accounts jointly with resident close relatives on ‘former or survivor’ basis. For example, Ms. Reecha, who lives and works in Fiji, would be able to open an NRE account with a bank in India and transfer funds out of her savings in Fiji to her NRE account. Why transfer funds from NRO to NRE? Interest on an NRE account is exempt from income tax in India to a person resident outside India as per FEMA or who is permitted by RBI to maintain the NRE Account (section 10(4)(ii)). In short, as long as a person is a non-resident under FEMA and is allowed to maintain the NRE account under FEMA, interest would continue to be exempt from income tax in India. If a non-resident becomes a resident under FEMA (e.g. return to India for employment), the interest on the NRE account will no longer be exempt from income tax in India from the day of his return. NRO to NRE transfer is a strategic move NRO to NRE transfer is a strategic move. Whether you want to repatriate funds, invest in India on a repatriable basis, or simply benefit from tax-free interest, transferring funds from an NRO to an NRE account (subject to RBI rules) is a smart financial step for many NRIs. However, it is wise to consult your bank and

3. a tax advisor to ensure all compliance requirements – such as Form 15CA/15CB, CA certificate, and TRC – are met. Choosing the right bank and tax advisor Choosing the right bank It is the bank which is actually doing all the work including account opening, converting foreign exchange, allowing credits, processing payments, making investments, ensuring compliance with RBI, remitting funds or transferring from NRO to NRE. This is why selection of a bank and bank branch is very important for an NRI’s investment journey. Choosing the right tax advisor When it comes to NRO to NRE fund transfer, compliance, paperwork, and foreign exchange regulations can be overwhelming. This is where ExpertNRI plays a key role. From helping you interpret tax rules, obtain TRCs, and submit Form 15CA/CB, to working closely with your bank to ensure proper remittance, ExpertNRI ensures your fund transfer is hassle-free, compliant, and optimized for tax savings. In summary, if you’re an NRI looking to streamline your financial life, planning your NRO to NRE transfer should be a top priority. With the right guidance, professional support, and timely compliance, you can make the most of your funds, while minimizing tax liabilities. Resource: NRO To NRE Fund Transfer – Everything An NRI Needs To Know