What changed
Previously, transferring funds from an NRO account to an NRE account was not allowed. Now, NRIs can move up to USD 1 million per financial year from NRO to NRE accounts, provided taxes are paid as if the funds were remitted abroad. The credit to the NRE account is treated as an eligible credit under the existing FEMA deposit regulations.
What it means for you
Banks must update their systems to process NRO-to-NRE transfers within the USD 1 million ceiling, ensuring tax compliance. This change simplifies repatriation for NRIs, potentially increasing NRE account inflows and reducing NRO balances. Lenders should verify tax payments and monitor per-financial-year limits to avoid regulatory breaches.
What you must do
- Update internal procedures to allow NRO-to-NRE transfers up to USD 1 million per financial year.
- Ensure tax deduction at source or tax payment proof is obtained before processing transfers.
- Train staff on the new eligibility criteria and documentation requirements for such transfers.
- Monitor customer accounts to prevent exceeding the annual ceiling across all transactions.
Who it affects
All Authorised Dealer banks, All Authorised banks, NRI and PIO customers with NRO and NRE accounts
What is the maximum amount I can transfer from NRO to NRE account per year?
You can transfer up to USD 1 million per financial year, subject to payment of applicable taxes.
Do I need to pay tax on the transferred amount?
Yes, tax must be paid as applicable, similar to if the funds were remitted abroad. Ensure you provide proof of tax payment to your bank.
Is this transfer allowed for all NRIs?
Yes, as per the definition in FEMA deposit regulations, all NRIs are eligible, subject to the overall ceiling and tax compliance.