This article looks at the tax and compliance rules to keep in mind for transferring money to an NRE account by resident Indians, from NRO accounts and from abroad.

📚 Table of Contents

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• What is an NRE account? How does it differ from an NRO account?
  • Non-Resident External (NRE) Account
  • Non-Resident Ordinary (NRO) Account
  • Foreign Currency Non-Resident (FCNR) Account
  • Resident Foreign Currency (RFC)
• How to transfer money from abroad to an NRE account?
• How to transfer money from an NRO to an NRE account?
• Do you need an NRE account to transfer money abroad?
• How to transfer money from a resident Indian to an NRE account?

What is an NRE account? How does it differ from an NRO account?

To comply with the Foreign Exchange Management Act (FEMA) rules, an NRI cannot have regular savings accounts in India. Therefore, you must convert existing accounts to NRO accounts and excess accounts must be closed. This step is important once your status changes from resident Indian to NRI and can be done either online, for selected banks, or during your next visit to India.

Feature	NRO Account	NRE Account	FCNR(B) Account	RFC Account
Income Source	Indian income (including capital gains)	Primarily foreign income, some taxable Indian income	Foreign currency deposits	Funds held in foreign currency by returned NRIs
Repatriation	Allowed with Forms 15CA/15CB, up to $1 million/year	Fully repatriable (for foreign income and taxable Indian income)	Fully repatriable	Fully repatriable
Limits	Unlimited when deposited; $1 million/year on repatriation	No limits on deposits/withdrawals	No limits on deposits/withdrawals	Generally no specific limits defined, but related to funds brought back upon return or received from specific sources
Capital Gains	Can receive proceeds from sale of assets	Cannot receive proceeds from sale of assets directly. Proceeds must go to NRO	Cannot receive proceeds from sale of assets	Can receive proceeds from sale of foreign assets held before returning
Taxation	TDS applies to Indian income	Generally no tax on foreign income, tax applies to specific Indian income	Interest earned is tax-free in India	Interest is taxable at slab in India
Currency	INR and Foreign currency	Foreign currency	Foreign currency	Foreign currency

Non-Resident External (NRE) Account

An NRE account can be opened only once you are an NRI as a fresh account. Old accounts, which existed when you were a resident Indian, must be converted into NRO accounts, not NRE accounts. You can check your NRI status here: Who is an NRI and who is not? Understanding FEMA and NRE/NRO bank accounts.

This account is used to send money to India. The features and uses are:

• This is a fresh account that can only be opened by an NRI. Existing resident Indian or NRO accounts cannot be converted to NRE
• Money deposited in this account must originate outside India.
• Interest earned is tax-free in India but may be taxable in the country where the NRI is residing.
• You can send both interest and principal out of India without limits.
• Deposits can only be made in foreign currency, and withdrawals are in INR.
• Joint accounts are allowed only with another NRI.
• You can transfer funds to other NRE or NRO accounts.
• It may be used for stock investing but is not recommended.
• It is the best option for Mutual Fund investing due to easy repatriation.
• It cannot be used for investing in RBI/Gilt bonds.

Non-Resident Ordinary (NRO) Account

This account is used for any income and investments in India. The features and uses are:

• Existing savings accounts are converted to NRO accounts (and not NRE) once you leave the country and status changes to NRI from resident Indian as per tax residency rules
• Interest earned is taxable in India at current slab rates. The benefit of the Double Taxation Avoidance Agreement (DTAA) is available with most countries so that you can offset tax paid in India as an input tax credit in your home country.
• You can send both interest and principal out of India, but the principal must be within $1 million. A CA must certify that you have paid taxes on this income.
• You can make deposits in both foreign currency and INR, and withdrawals are in INR.
• Joint accounts are allowed with another NRI or a resident.
• Incoming transfer into NRO from Indian resident accounts do not attract TCS under the LRS rules
• Funds can be transferred only to another NRO account or to even resident accounts.
• Transfer from NRO to an NRE account i.e. for repatriation is capped at $1 million per financial year and requires CA input on the required forms to be filled
• This account is used to receive income from interest, FD, rent, stock and MF dividends, and the proceeds from selling real estate, stocks, and mutual funds.
• It can be used for both stock and MF investing.
• Only NRO accounts can be used for investing in and for receiving interest from RBI/Gilt bonds from the RBI Retail Direct Portal.

Foreign Currency Non-Resident (FCNR) Account

Note: FCNR(A) accounts were discontinued in 1993 and used to have exchange rate guarantee from the RBI. Now only FCNR(B) accounts, without exchange rate guarantees, exist.

• NRIs or PIO card holders can open FCNR(B) accounts either singly or jointly with other NRIs
• FCNR(B) accounts are term deposit (FD-type) accounts held in foreign currency (USD, EUR, GBP, AUD, SGD, CAD, CHF, HKD are typical)
• Interest is paid every 180 days and the account matures in one to five years
• Interest earned is tax-free in India
• Both principal and interest are fully repatriable
• Pre-mature withdrawal is possible with interest rate penalties
• They eliminate currency conversion risk since they are held in foreign currency
• Can be used for payments in India, making investments and transfers to other NRE or FCNR accounts

Resident Foreign Currency (RFC)

Resident Foreign Currency (RFC) are for NRIs who have returned to India and used to store foreign currency, say in USD, GBP and EUR

• Allows returning NRIs to hold onto foreign currency instead of immediately converting to INR
• These amounts are repatriable and can receive funds from abroad or other NRE / FCNR accounts
• Interest rates are generally lower than FCNR or NRE accounts
• The interest income on these accounts are taxable at slab rates
• RFC accounts help you time your currency conversions from foreign currency to INR based on expected rate movements
• Use the RFC account if you have large INR liabilities (e.g. builder payments for an under-construction house) and you expect the Rupee to depreciate against your foreign currency holdings

This table summarises these account types for every type of tax status:

Account Type	NRI	RNOR	Resident (ROR)
Account Type	NRI	RNOR	Resident (ROR)
NRE	Open & Operate	Can Continue (if not yet reclassified) New not allowed	Must be converted to Resident Account
NRO	Open & Operate	Continue as-is	Continue as-is
RFC	Cannot open	Can Open & Operate	Can Continue / No tax benefits
FCNR (B)	Open & Operate	Cannot open new Continue till maturity	No new deposits Continue till maturity → must convert

How to transfer money from abroad to an NRE account?

Transferring money from abroad to your own NRE account in India is the reason that the NRE account exists. To transfer the amount, you primarily need:

• the NRE account details like account number, IFSC code
• a transfer provider like Wise, Western Union, PayPal etc or your bank (via wire transfer)

The transfer fees and time will depend on the platform chosen and the amount that is being transferred. There is no additional tax in India or abroad since this is your own post-tax money. There is no limit to the amount being transferred (though some platforms have their limits and banks do not).

How to transfer money from an NRO to an NRE account?

An NRE account allows unrestricted repatriation, i.e. money being sent abroad without tax or limits, while an NRO account has limits.

As per the RBI circular from 2012, NRO to NRE transfer is allowed up to $1 million in a financial year (Apr to Mar).

Since income in the NRO account is taxable, only the post-tax amount can be transferred to your NRE account. This means you need to produce a certificate, via CA, that all taxes have been paid before the bank will accept the NRO to NRE transfer.

For doing the NRO to NRE transfer, you must submit:

• FEMA declaration that essentially says that you are an NRI and eligible to transfer from NRO to NRE
• Form 15CA is a declaration filed via the Income Tax portal (with a copy to the bank) that the money transferred is post-tax
• Form 15CB is a certification provided by a CA that the amount being transferred is compliant with all relevant income tax sections (including Section 195 regarding TDS) and any tax paid already (say on interest, capital gains or rent) is DTAA compliant (so that you get a foreign tax credit on the tax paid in India on the income).

Note: Form 15CB is optional for amounts below ₹5 lakhs but banks will ask for it anyway.

Do you need an NRE account to transfer money abroad?

You can transfer from NRO as well by following the Form 15CA/CB process as described above. Having an NRE account is not mandatory.

How to transfer money from a resident Indian to an NRE account?

You cannot directly transfer money from a resident Indian account to an NRE account. The transfer must be first to the NRO account of the NRI and then from NRO to NRE as above.

Resident to NRO transfers come under RBI’s Liberalised Remittance Scheme (LRS) with TCS applicable for all transfers above prescribed thresholds.