Repatriation of Amount from NRO to NRE

Repatriation of Amount from NRO to NRE

NRO or Non-Resident Ordinary account will help a person maintain their income in the form of rent, dividend, or such other incomes like profit accrued through an investment or property held in India. And here, the resident Indian and non-resident Indian can be joint account holders a d hold the account together.
It even enables the account holder to receive the amount in Indian or foreign currency but limits you to withdraw funds in Indian rupees alone. And the funds which are available in an NRO account are not freely repatriable to any other currency or country used for income or profit which arise or accrue in India and the interest earned on the balance held in this account shall be taxable.

What is NRE Account?

NRE account stands for Non-Resident External Account and it is an account owned by a Non-Resident Indian for transferring foreign earnings to India. The interest which is earned on this account is not taxable or is tax-free and can be opened by either one NRI alone or as a joint account with other NRI’s. The deposit can be made in foreign currency and withdrawn only in Indian Currency. As the same is deposited in foreign currency and withdrawn in Indian Currency, the same is prone to exchange rate risks.
The differences between NRE and NRO Account

1. An NRE account is the account that is started by an NRI, for depositing his or her earnings in the foreign country or the foreign earnings. While the NRO account is started by the NRI for managing the income earned by him or her in India in the form of rent, dividend, interest, or such other forms.
2. NRE accounts are exempt from tax. Neither the deposits nor the interest earned on the same shall be taxable in the hands of the assessee. At the same time, the interest which is earned on the NRO account deposit would be taxable in the hands of the assessee.

iii. A joint NRE account can be opened by an NRI only with another NRI. While the NRO account can be opened by an NRI (say a close relative like brother/father) with another NRI or Indian Citizens 

1. For an NRI, the income which is arising outside Indian can be deposited into an NRE or NRO account. But the income which is arising in India can be deposited only into the NRO accounts.
2. The withdrawal from both of these accounts i.e., NRE and NRO can be done only in Indian Currency. Thus, taking the case of an NRO account if the deposit and withdrawal are made in INR or Indian Rupees then there shall be no exchange rate risk. But in the case of an NRE account, there shall be currency rate fluctuations and thereby exchange rate risk as the deposit is made in foreign currency.
3. In the case of an NRE account, you can transfer the funds to another NRE account as well as to another NRO account. But the funds in an NRO account can only be transferred to another NRO account but not to an NRE account.

Can funds be transferred from NRO Account to NRE Account by NRIs?
Yes, an NRI (Non-Resident Indian) can transfer his funds from an NRO Account to an NRE Account. And this is allowed by the Reserve Bank of India (RBI) up to USD 1 million during a year from NRO Account to the NRE Account.
But for such transfer of amount or fund from the NRO Account to the NRE Account the following documents listed will be required:
– A cheque that is signed and approves the transfer of funds from NRO to the NRE account
– FEMA (Foreign Exchange Management Act) declaration
– evidence of source of funds
– Form 15CA
– Form 15CB – It is a form certified by the CA (Chartered Accountant). It contains details regarding the payment like TDS rate, deductions, applicability of Double Taxation Avoidance Agreement).
Reasons due to which Funds are Transferred from NRO to NRE Account
There are several reasons why the funds may be transferred from NRO to NRE Account. The individual holding such account may need to transfer the income in Indian currency and withdraw to meet investments and expenses in his preferred currency abroad or the preferred foreign currency.
An individual might need to maintain an NRO Account only for the purpose of collecting the Indian Income and as well manage all investments in an NRE account which would provide you with the flexibility of full repatriation when in need or urgency for funds. And in the case of an individual who needs to access the funds in an NRO account in such other currency than the Indian Currency, then transferring it to an NRE account might be the best solution he could opt for.

Benefits offered by NRE Account

1. FEMA does not impose any restriction on the maximum amount which can be transferred from an NRE Account as the money deposited in an NRE account is earned outside India and is freely repatriable.
2. The principal amount which is available in NRE accounts would be exempt from taxes.