How to remit money from your NRO account: What Every NRI Needs to Know

Key Takeaways:

- NRIs can remit up to $1 million per financial year from NRO accounts for non-current income, subject to RBI approval for amounts exceeding this limit.

- Current income like rent, dividends, and interest can be remitted without any limit after paying applicable taxes.

- Comprehensive documentation, including source of funds, tax compliance certificates, and RBI forms, is mandatory for outward remittances.

- Banks act as authorized dealers and facilitate the remittance process after verifying the required documents.

- Timelines for remittance vary based on the bank's scrutiny and any additional queries raised.

Commentary:

For Non-Resident Indians (NRIs), managing their financial affairs in India often involves navigating a complex web of regulations and procedures. One such area that demands careful attention is the transfer of funds from a Non-Resident Ordinary (NRO) account to their overseas accounts or NRE (Non-Resident External) accounts.

The process of remitting money from an NRO account is governed by the Foreign Exchange Management Act (FEMA) and the guidelines issued by the Reserve Bank of India (RBI). The first crucial factor that determines the remittance limit and procedures is the source of funds in the NRO account.

If the funds in the NRO account are classified as "current income," such as rent, dividends, pension, interest, or salary, there is no limit on the amount that can be remitted abroad. However, it is essential to ensure that all applicable taxes on this income have been duly paid in India before initiating the remittance process.

On the other hand, if the funds in the NRO account are derived from "non-current income," such as the sale of property, mutual funds, or other assets, the remittance is subject to an annual limit of $1 million per financial year. This limit applies to the total remittances made during the financial year from non-current income sources.

Regardless of the source of funds, the remittance process requires comprehensive documentation to substantiate the legitimacy of the transaction and comply with regulatory requirements. The key documents required include:

1. Application for outward remittance from the NRO account

2. Form A2 prescribed by the bank in line with RBI regulations

3. Form 15CB (a Chartered Accountant's certificate)

4. Form 15CA (a declaration by the NRI/PIO to the Income Tax Department)

5. Copy of PAN card

6. Evidence of the source of funds

7. Copy of passport

Additionally, the NRI may need to submit bank-specific declarations and any other documents requested by the bank to facilitate the remittance process.

It is crucial to note that RBI approval is required if the remittance of non-current income exceeds the specified limit of $1 million per financial year. In such cases, the bank will seek RBI's approval on behalf of the NRI/PIO after verifying the submitted documents.

The time taken for the remittance process can vary depending on the bank's scrutiny and any additional queries or documentation required. It is advisable to initiate the process well in advance and cooperate with the bank to ensure a smooth and timely remittance.

FAQs:

1. What is the difference between an NRO and an NRE account?

The primary difference between an NRO (Non-Resident Ordinary) and an NRE (Non-Resident External) account lies in the repatriation of funds. While money from an NRE account can be easily transferred out of India, the process for remitting funds from an NRO account is subject to specific regulations and limits.

2. Can an NRI remit the entire balance from their NRO account in one go?

No, there are limits and conditions governing the remittance of funds from an NRO account. For non-current income, the annual limit is $1 million per financial year, while current income can be remitted without any limit after paying applicable taxes.

3. What happens if the remittance exceeds the $1 million limit for non-current income?

If the remittance of non-current income exceeds the $1 million limit, RBI approval is required. The bank will seek RBI's approval on behalf of the NRI/PIO after verifying the submitted documents.

4. Can an NRI remit borrowed funds or funds transferred from another NRO account?

No, NRIs are strictly prohibited from remitting borrowed funds or funds transferred from another NRO account. The remittance must be made from the NRI's legitimate receivables in India.

5. What is the significance of Form 15CA and Form 15CB?

Form 15CA is a declaration by the NRI/PIO to the Income Tax Department, while Form 15CB is a Chartered Accountant's certificate confirming that applicable taxes have been paid on the funds being remitted. These forms are mandatory for outward remittances from NRO accounts.