If you're moving to the U.S., managing your money in India is something you need to give thought to. In one of our previous posts, we had written about NRE and NRO accounts 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:
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.
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.
Transfer money from an NRE to an NRO account
This is when you transfer the money you've earned abroad to an account with money you've earned in India. This transfer is relatively seamless, and most banks allow this.
Transfer money from an NRO to an 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 an NRE account
This 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 from a chartered account
e. Form 15CA
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 it make sense to transfer funds from an NRO to an NRE account?
- 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.
If access to the money you've earned in India in the currency of your choice is what you're looking for, it makes sense to transfer money to your NRE account.