Ann Transfer from NRO to NRE Refers to the process of transferring funds from a non-resident ordinary account (NRO) to a non-resident external (NRE) account. These are two types of bank accounts designed specifically for Non-Resident Indians (NRIs). In this blog, we will explain the difference between the two, why and how to migrate from NRO to NRE.
NRO account:
- goal: Primarily used to process funds received from sources within India, such as salaries, rental income, interest from local assets, etc.
- Tax implications: In India, interest received on NRO accounts is subject to tax. The tax rate is determined by the applicable tax bracket and total income.
- repatriation: Generally, principal from NRO accounts can be repatriated, but there may be restrictions and tax implications. However, if your account has been dormant for an extended period of time, you may be limited in transferring the full amount.
NRE account:
- the purpose: Designed to hold foreign currency earnings. Ideal for managing funds earned or received from sources outside India.
- Tax benefits: In India, the interest earned on NRE accounts is completely tax-free. This makes NRE accounts attractive for NRIs looking to maximize their earnings.
- Repatriation: Both the principal and interest earned in your NRE account can be freely repatriated to your home country without any restrictions. This flexibility makes NRE accounts ideal for saving and investing foreign currency.
Why move from NRO to NRE?
Due to some compelling reasons, NRIs may transfer funds from NRO to NRE account.
- tax saving: Not wanting to pay taxes on interest earned in India is the main motive for moving funds from NRO to NRE account. You can retain a large portion of your earnings by taking advantage of the tax-free interest provided by your NRE account.
- Repatriation flexibility: Compared to NRO accounts, NRE accounts offer more freedom to send money back to your home country. You can transfer both principal and interest without any restrictions, making it easy to get your money back when you need it.
- currency hedging: If you expect exchange rates to fluctuate, depositing funds into an NRE account may protect you from currency risks. Keeping your funds in a foreign currency denominated NRE account protects you from losses caused by unfavorable fluctuations in exchange rates.
- investment opportunity: When it comes to investments, NRE accounts have more options than NRO accounts. In India, you can use your NRE account to invest in a variety of financial instruments such as bonds, stocks, and mutual funds. By doing so, you may be able to diversify your investments and increase your profits.
- Simplified transactions: If you regularly travel between India and your home country, keeping your foreign exchange reserves in an NRE account will facilitate your financial transactions. Easily access and manage your funds without the need for additional documentation or currency conversion.
Steps required to migrate from NRO to NRE
- qualification: Make sure you meet the requirements to open and maintain both an NRO and NRE account. This usually requires you to present your identity card and NRI status document.
- document: Obtain necessary documents like PAN card, passport, visa, address proof etc.
- Make a transfer request: Go to your bank and make a transfer request specifying your NRO and NRE account information and the amount you need to transfer.
- Know Your Customer (KYC) Verification: To ensure that regulatory standards are complied with, banks may perform KYC verification. This may require you to submit more documentation or go through an identity verification process.
- Compliance check: The bank will ensure that the transfer request complies with all relevant laws and regulations, such as foreign exchange and taxes.
- Transfer processing: Once the verification process is completed and the transfer is approved, the funds will be transferred from your NRO account to your NRE account. Processing times may vary depending on bank and transaction volume.
Important considerations
- Tax implications: Refunding funds from an NRO to an NRE account may have tax implications, especially if the entire NRO account balance is returned. Please consult a tax professional to determine the exact laws and regulations that apply to you.
- exchange rate: The amount credited to your NRE account depends on the exchange rate at the time of the transfer. To choose the best time to send money, keep an eye on changes in currency rates.
- bank charges: For NRO to NRE transfers, fees may be levied by certain banks. To choose the most economical option, check the applicable fees and evaluate the costs charged by different agencies.
- document: Please make sure you have all the required documents to avoid delays in the transfer process. Keep copies of all documents related to the transfer for your records.
conclusion
NRO to NRE transfer is a valuable option for NRIs who want to optimize their finances and take advantage of the benefits that NRE offers. NRE accountYou can understand why by looking at the topics covered in this blog.

