Any Indian who has lived 180 days or more outside India is known as NRI or a Non Resident Indian. NRE (Non Resident External) and NRO (Non Resident Ordinary) are the two kinds of accounts that only NRI’s can open when they need a means to transfer money or make any kind of investment in India.
NRIs often choose between two bank accounts namely NRE and NRO. However there are some differences between the two, the major one being the balance held in NRE accounts can be repatriated abroad, whereas funds in NRO account are not generally repatriable (meaning the funds can be remitted abroad). Repatriation of balances held in NRO accounts is allowed with subject to certain conditions. Another major difference between NRE and NRO accounts is that interests earned on the money in NRO account is taxable. However, the money in NRE account is totally tax-free.
Transfer of funds from NRE to NRO account and vice versa
Transfer from NRE to NRO: It is easy to transfer funds from an NRE to an NRO account and is allowed by RBI since long. When we transfer funds from NRE to NRO account, the funds become conditionally-repatriable (up to USD one million or equivalent per financial year), subject to payment of taxes, as applicable.
Transfer from NRO to NRE: This type of money transfer was not allowed till sometime ago, but now it is permitted. Transfer of funds from NRO to NRE account is permitted within the overall ceiling of USD one million or equivalent per financial year (April – March), subject to payment of taxes, as applicable. You need to submit Form 15CA (online application form) and 15CB (Chartered Accountant Application) to your Branch for transferring funds.
Last year in March, the Reserve Bank of India has allowed non-resident Indians (NRIs) to transfer funds from NRO account to NRE account subject to a ceiling of $1 million in a financial year.
Before March 2012, the permission was under review with K J Udeshi Committee. However after the recommendations of K J Udeshi Committee which reviewed the facilities for persons under Foreign Exchange Management Act, 1999, the fund transfer from NRO to NRE account was permitted.