A Non-Resident Indian (NRI) usually opens two bank accounts in India, namely - Non-Resident (External) account (NRE) and Non-Resident (Ordinary) bank account (NRO). One of the key differences between the two accounts is repatriation or transferability of money from the account out of India.
Money from NRE account can be easily transferred out of India. However, the same cannot be said for the NRO account. There are certain document requirements, approval needed from Reserve Bank of India (RBI) and annual limit that must be adhered to in order to transfer money from NRO account out of India.
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Read on to know the rules an NRI must follow to take the NRO money out of India.Source of funds
The source of funds play an important role in determining the amount of money that can be remitted out of India from an NRO account.
Suresh Surana, Founder, RSM India - a business consulting group, says, "An NRI is permitted to remit up to USD 1 million per financial year out of the balances held in the NRO account. This limit is applicable to the funds sourced from non-current income. However, there is no limit on remittance of current income abroad from NRO account."
Kritika Tewani, Associate Director, Deloitte Touche Tohmatsu India LLP says, "Repatriation of current income like rent, dividend, pension, interest, etc. of NRIs out of their NRO account is not subject to any limit. That said, remittance of assets (not being current income) is subject to USD 1 million per financial year. The term 'current income' has not been defined under the Foreign Exchange Management Act, 2000 (FEMA). However, according to RBI circulars, it includes income in the nature of rent, pension, salary, dividend, interest income etc. An example of remittance of assets (not counted as part of current income) can be proceeds from sale of property or mutual funds in India."
Amarpal S. Chadha, Tax Partner and Mobility Leader, EY India says, "As per FEMA Regulations, an NRI or PIO can remit or repatriate the balances in NRO account up to USD 1 million per financial year. The above limit is applicable for the total remittances during the financial year from non-current income. An NRI/PIO can remit the current income from NRO account without any limit."
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Since the money needs to be repatriated outside India or to a bank account which makes money freely repatriatable, RBI clearance is needed. Vivek Jalan, Partner, Tax Connect Advisory, a multi-disciplinary tax consultancy firm says, "Every rupee transferred by NRI from an NRO account out of India or to NRE account requires approval from RBI."
Surana says, "Authorised dealer banks i.e., banks offering/opening NRO accounts for NRIs have the delegated powers of the RBI to enable making of such remittances subject to documentation and other requirements. The RBI approval is needed only if the amount remitted outside India exceeds USD 1 million in a financial year for non-current income. For current income such as rent, pension, interest income etc., no such approval is needed."
Concurring with Surana's views, Tewani from Deloitte says, "An authorised bank does not need an approval from RBI to remit current income from NRO account. Approval is required for remittance of assets where the amount exceeds USD 1 million in a financial year."
Chadha from EY India says, "RBI approval is required if the remittance of non-current income by NRI/PIO exceeds the specified limit of USD 1 million per financial year."
Experts agree that it is the bank that will take permission on behalf of NRI/PIO for remitting money outside India. Once the RBI grants approval with proper documents in place, money will be remitted outside India.Payment of taxes and TDS is a pre-requisite
The money in NRO account comes from the income earned from India. Jalan says, "Transfer of money from NRO to NRE account or repatriation outside India can only happen post payment of taxes on that money, in India, if applicable." He explains this with an example. In case the funds are received on account of gift from father, then no taxes need to be paid in India and the transfer can happen without payment of taxes. However, in case the funds are received from rent income received in India, then the taxes will have to be paid before the transfer of the funds outside India.
Preeti Sharma, Partner, Tax & Regulatory Services, BDO India says, "Section 195 of the Income Tax Act, 1961 requires that Form 15CA and Form 15CB be furnished at the time of outward remittances from NRO Accounts. The section further provides that TDS is applicable on any payment (containing taxable income element), which is being made to NRI, at the rates in force. The TDS rate is the maximum rate as per the provisions of Income-tax Act applicable on such nature of income, subject to any relief under the Double Tax Avoidance Agreement (DTAA) or special rate provided in the Income Tax Act. No TDS is required merely for transfer of funds from NRO to NRE Account or to your own bank account outside India."Documents needed to send money abroad
An NRI will require following documents to transfer money from NRO account irrespective of source of funds and amount of transfer:
a) Application for outward remittance from NRO Account
b) Form A2 as prescribed by the Bank in line with Reserve Bank of India (RBI) Regulations
c) Form 15CB (A Chartered Accountant Certificate)
d) Form 15CA (A Declaration by NRI/PIO to Income Tax Department)
e) Copy of PAN card
f) Evidence of source of funds
g) Copy of Passport
Surana says, "Apart from above mentioned documents, an NRI may have to submit bank specific declarations and any other document, to the satisfaction of the banker, for making remittance."
"A chartered accountant will issue certification using Form 15CB that relevant taxes have been paid by the NRI on the money lying in the NRO account. Practically, it is the CA who files both - Form 15CA and 15CB - on behalf of NRI after due verification," adds Jalan.Evidence of source of funds required
For source of funds, the documents required will depend on from where the money in NRO account has come. Tewani says, "Documentation regarding the source of funds is required to substantiate that the remittance is bonafide. It is also needed to validate the declaration given by the applicant on the nature of income and the limit applicable for the financial year, if any."
Chadha says, "As per FEMA Regulations, in case the remittance is to be made from the balances held in the NRO account, then the bank is under an obligation to obtain an undertaking from the account holder stating that 'the said remittance is sought to be made out of the remitter's balances held in the account arising from his/ her legitimate receivables in India and not by borrowing from any other person or a transfer from any other NRO account'. In other words, an NRI/PIO is precisely restricted to remit 'borrowed funds' and 'transferred funds from other NRO account'."
If the money in NRO account is due to rent received, then copy of rent receipt or rent agreement will be needed. In the case of dividends, proof of dividend or bank statement reflecting the same is needed. If the money is obtained from selling inherited property, then bank can ask for death certificate of the deceased and registered sale deed of property.
Hence, one needs to ask the bank as to what evidence they require to substantiate the source of funds. In any case, every rupee lying in the NRO account must have documentary evidence of the source of funds, to be remitted outside India.Where to submit the documents?
An individual is required to submit the required documents to their bank. Sharma says, "All banks provide online facility for raising request for foreign remittance and submission of documents. You may opt to submit hard copy of documents in the bank as well. However, Form 15CA/15CB is required to be filed electronically on the Income Tax e-filing portal and is verified either using a digital signature or electronic verification code (EVC)."Time taken to remit the money
It is not possible to say how much time it would take for funds to be remitted out of India from an NRO account. This is because remittance from NRO account can be done only after verification of the documents submitted and if these are found satisfactory. If the bank raises an additional query or needs an additional document, then an individual is required to respond to that. Only when the bank is satisfied with the documents, then a remittance can take place.How is the limit on remittance out of NRO account calculated for a financial year
There is no limit on the number of times remittance can be made from an NRO account. Sharma says, "Here it is important to understand that the currency exchange rate fluctuates depending on various macroeconomic factors. Apart from the currency exchange rate, there are charges levied by the bank as well on the remittance. The final amount that you will remit will be calculated in the foreign currency. This final amount will be deducted from USD 1 million limit to know the balance left, if any."Other things to keep in mind
There are other things that an individual should keep in mind while transferring money out of India. One should know the exchange rates offered by banks for conversion of INR to the foreign currency into which you want to convert money (while remitting out) from the NRO account. Once should compare the exchange rates offered by your bank branch and other online websites.
Transaction charges are levied for converting INR to foreign currency. These transaction charges are deducted before arriving at the final amount to be remitted in foreign currency. Hence, lower transactions can lead to a higher amount of foreign currency remittance.
In case of remittances in instalments, it is advisable to make all the instalments through the same bank or authorised dealer. This is advisable as the same bank will have a record of the total amount remitted by you during the financial year. This will also help an individual avoid breaching the set limit of USD 1 million and also avoid penalty.
