How to transfer money from NRE to NRO account and vice versa?
NRE NRO money transfer

How to transfer money from NRE to NRO account and vice versa?

Varun Kashyap

Table of Contents

If you're moving to the US you will definitely need a US Bank Account and apart from managing your expenses in the US, managing your money in India is something you also need to give thought to. In one of our previous posts on NRE and NRO accounts, we have explained what is NRE account, what is NRO account and the difference between them. In this piece, we'll tell you how you can transfer money between these accounts and the processes involved.

First, a quick recap:

What is NRE account?

  • A Non-Resident External Account (NRE) helps you manage the income you earn outside of India, and the interest you earn is tax-free.
  • You can transfer the principal and interest earned from your NRE account to your foreign Bank Account.

Advantages of NRE account

  • Serves as an investment vehicle: Funds in the NRE account can be used to make investments and carry out business activities in India.
  • Access to international debit card: Banks provide international debit cards to NRE account holders. You can use this card for international spending purposes.
  • Easy withdrawal: Using the international debit card, you can withdraw money from your NRE account 24*7, all 365 days of the year. You can avail internet banking services to manage your account online.
  • Account convertibility: The process of converting an NRE account into a regular resident account is simple and straightforward. This can be done when the NRI account holder returns to India and becomes an Indian resident.

Disadvantages of NRE account

  • Income earned in India cannot be managed using an NRE account as it is meant only deposits from foreign countries.
  • Joint account holding with Indian residents is not possible.

What is NRO account?

  • A Non-Resident Ordinary Account (NRO) allows you to maintain the income you earn in India. 30% tax+surcharge+education cess is levied on the interest you earn from your NRO account.
  • You can transfer up to a maximum of a million dollars per year from your NRO account to your foreign Bank Account.

Advantages of NRO account

  • Easy investment: Funds in the NRO account can be invested in mutual funds, Indian bonds and investment options on a non-repatriable basis.
  • Loans against NRO account: NRO fixed deposits can be used as a security against loan and overdraft facilities.
  • Interest on Fixed Deposits: You can earn a considerable interest amount from NRO fixed deposits.
  • Minimum Balance Requirement: NRO accounts do not require a high balance amount. Most banks require only Rs. 10,000 as a minimum balance.

Disadvantages of NRO account

  • Income earned on balances in NRO accounts are not exempt from tax.
  • Funds cannot be freely repatriated into any foreign currency.

Difference between NRE and NRO account

Given below are a few of the key differences between NRE and NRO account


NRE account 

NRO account 

Taxation 

The principal amounts in NRE accounts are exempt from tax. Thus, the interests are also tax-free. 

The interest earned in NRO accounts is taxable. 

Repatriation (Transferability)  

Both the principal amount and interest are freely repatriable. 

Charges apply for repartition 

Deposits and Withdrawals

Money can be deposited in foreign currency, and withdrawn in Indian currency

Money can be deposited in both foreign and Indian currency, and withdrawn in Indian currency

Joint account 

Can be opened with an another NRI 

Can be opened with an another NRI or an Indian citizen 

Exchange Rate Risk

It is prone to exchange rate risk

It is not prone to exchange rate risk

How to transfer money from an NRE to NRO account?

This is when you transfer the money you've earned abroad to an account with money you've earned in India. NRE to NRO transfer is relatively seamless and straightforward, and most banks allow this. Contact the bank with which you have opened your NRE account to find the easiest way to transfer funds from NRE to NRO account.

How to transfer money from an NRO to NRE account?

This is when you transfer the money you've earned in India to an account with money you've earned abroad.

The process of transferring money from an NRO to NRE account is explained below:

This process involves a bit of paperwork. Here's a list of documents you will require:

a. A signed FEMA declaration

b. A signed cheque for the transfer of funds

c. Evidence of the source of funds

d. Form 15CB (Form 15CB is a certificate regarding the taxes and rates paid by you; it is to be signed by a chartered account)

e. Form 15CA ( Form 15CA is a declaration of remitter; it is used for collecting information relating to payments chargeable to tax by the non-resident recipients)

The signed letter can be used if your accounts are in the same bank and approved by the bank. You need to submit these documents to your bank to start the transfer process.

When does NRO to an NRE transfer make sense?

  • If you need the money you've earned in India to cover your expenses abroad.
  • If you want to manage all your money from your NRE account as the interest you earn is tax-free.
  • If you want to take advantage of the currency conversion rates that can work in your favour when you transfer money to your NRE account.

When does NRE to NRO transfer make sense?

If access to the money you've earned in India in the currency of your choice is what you're looking for, it is ideal to transfer money to your NRE account.

Conclusion

It is important to keep in mind the differences between the NRE and NRO accounts,  and to ensure that you have the necessary documents before you attempt to transfer funds between NRE to NRO account or vice versa. You can choose between these types of transfers based on your requirements and the circumstances.

Frequently Asked Questions

Which is better NRE or NRO account?

While an NRE account seems better considering its tax-exempt status and ease of transferability, it all depends on your requirements. If you want to maintain your foreign-earned income in Indian currency, the NRE account is the ideal option, on the other hand, if you intend to save your income earned in India in Indian currency, then you can opt for NRO account.

Can I transfer from NRE to NRO account?
Yes, NRE to NRO transfer is possible. You can choose this option when you wish to have the income you have earned in India in any type of currency you want.

Can a person have both an NRE and NRO account?
Yes, certainly. An individual can open both NRO and NRE accounts to manage their earnings.

Who is eligible for an NRO account?
Persons of foreign nationality visiting India are eligible to open an NRO account, for their banking needs arising within the geographical territories of India.

Who is eligible for an NRE account?
The following are eligible to open an NRE account:

  • An Non-Resident Indian (NRI).
  • A person of Indian nationality living in a foreign country for studies, employment or business.
  • Persons working in UN organisations or officially appointed to work abroad by the Government of India.