NRIs should know that transferring funds from an NRO account demands adherence to specific document requirements, Reserve Bank of India (RBI) approvals, and annual limits
Non-Resident Indians (NRIs) often find themselves managing finances across borders, necessitating a nuanced understanding of banking regulations and procedures. In India, NRIs typically operate two types of bank accounts: R
Understanding the Basics: NRE vs. NRO Accounts
A fundamental disparity between NRE and NRO accounts lies in the transferability of funds outside of India. Money held in an NRE account can be readily transferred abroad, whereas the same is not true for NRO accounts. Transferring funds from an NRO account demands adherence to specific document requirements, Reserve Bank of India (RBI) approvals, and annual limits.
Source of Funds: Key Determinant
The source of funds plays a pivotal role in determining the amount of money that can be remitted from an NRO account. According to Suresh Surana, Founder of RSM India, NRIs can remit up to USD 1 million per financial year from NRO account balances sourced from non-current income. However, there’s no limit on remitting current income, such as rent, dividend, pension, or interest, from NRO accounts.
When is RBI Approval Necessary?
RBI clearance is essential for remittances from NRO accounts, particularly when transferring funds exceeding USD 1 million in a financial year for non-current income. For current income, such as rent or interest, approval isn’t required. Banks, as authorized dealers, can facilitate these remittances, provided all necessary documentation and requirements are met.
Understanding the complexities of NRO accounts, NRIs must remain vigilant about regulatory requirements, tax obligations, and documentation procedures to ensure seamless fund transfers across borders
Tax Implications and Prerequisites
Before transferring funds from an NRO account, taxes must be settled in India, if applicable. Section 195 of the Income Tax Act mandates the submission of Form 15CA and Form 15CB for outward remittances, with TDS applicable on taxable income elements. However, no TDS is required for transfers between NRO and NRE accounts or to personal bank accounts outside India.
Documentary Requirements
To initiate outward remittances from NRO accounts, NRIs must furnish several documents, including applications, prescribed forms, CA certificates, declarations, PAN cards, and evidence of the source of funds. The specific documentation may vary depending on the nature and origin of the funds.
Submission Process and Timelines
Documents must be submitted to the respective bank, either electronically or in hard copy. Processing times for remittances vary depending on document verification and bank procedures. Any additional queries or document requests from the bank may prolong the process.
Limit Calculations and Considerations
While there’s no limit on the frequency of remittances from NRO accounts, the total amount remitted must not exceed USD 1 million per financial year for non-current income. Currency exchange rates and bank charges also influence the final remittance amount.
Additional Tips
NRIs should compare exchange rates and transaction charges offered by banks to optimize remittance amounts. Making all remittances through a single bank or authorized dealer can help track total remittance amounts and prevent exceeding the USD 1 million limit.
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