Start with the source of funds and the RBI route
The Foreign Exchange Management (Remittance of Assets) Regulations, 2016 provide a route for eligible non-resident Indians (NRIs) and persons of Indian origin (PIOs) to repatriate qualifying assets through an authorised dealer bank. Check the applicable FEMA definitions; the RBI’s deposit guidance includes a qualifying Overseas Citizen of India cardholder in the PIO definition if resident outside India. FEMA residence and income-tax residence are separate tests.
The facility generally allows up to USD 1,000,000 (one million US dollars) per Indian financial year, 1 April to 31 March, for qualifying NRO balances, sale proceeds or inherited or settled assets, subject to the bank’s satisfaction and applicable taxes. Eligible NRO funds can also be transferred to NRE within this facility. Track the person’s aggregate use, including eligible transfers, even where funds are held in different banks. The unused portion does not increase the next year’s limit. If remitting the same facility in instalments, confirm the requirement to use the same authorised dealer. Check a separate route before assuming a balance must be staggered across years; a remittance over the applicable limit generally needs prior RBI permission unless another route applies.
| Question | NRE account | NRO account |
|---|---|---|
| What can be credited? | Permissible credits include eligible overseas remittances and NRE/FCNR(B) transfers. Current income such as rent, dividend, pension or interest may also be credited if the authorised dealer is satisfied as to source and applicable tax. | Permissible credits include inward remittances and legitimate dues in India, subject to FEMA conditions. Check the specific route for gifts, loans and asset proceeds. |
| Can funds be moved out? | Balances are generally repatriable. The authorised dealer may still require identity, source, remittance or reporting documents. | Current income may be remitted separately subject to applicable tax and bank verification. Other eligible balances may use the USD 1 million facility, including an eligible transfer to NRE. |
| Is interest taxable? | For the historical periods in the examples, section 10(4)(ii) of the 1961 Act applied only if its FEMA residence or RBI permission conditions were met. For income from 1 April 2026, check the corresponding exemption in Schedule IV to the 2025 Act. | Interest is generally taxable in India. Withholding depends on the applicable law, surcharge and cess where relevant and any supported treaty rate; it is not invariably 31.20%. |
| Is an internal NRO to NRE transfer an outward wire? | The transfer can be credited in rupees. A later overseas transfer is a separate transaction. | The bank verifies the FEMA transfer and may ask for tax or other documents. Check the legal reporting requirement independently; do not assume an internal credit requires the same forms as every foreign wire. |
Verify eligible funds and keep a source trail
- For a property sale, keep the acquisition and registered sale instruments, funding evidence and the actual gains and withholding computation. Document any tax paid or certificate for reduced withholding. A certificate and deducted tax do not by themselves establish final liability.
- For inheritance or settlement, keep the instrument, death certificate, title chain and probate, succession or other evidence where applicable. Requirements depend on the acquisition and facts.
- For securities or funds, reconcile holding and disposal statements, the acquisition and account route, gains and tax credits. For rent, deposits, pension, provident fund and gratuity, reconcile receipts, bank credits, withholding and exemptions separately.
- For a resident’s rupee gift, check the RBI relationship, banking, NRO credit and LRS conditions for the donor; then assess the separate tax definition of relative and other applicable tax exceptions. A gift being exempt from tax does not by itself prove the foreign exchange route.
Decide which tax and bank documents apply
For payments on or after 1 April 2026, consider the 2025 Act and Rule 220 of the Income-tax Rules, 2026, including Forms 145 and 146. For historical payments governed by the 1961 Act, apply section 195(6), Rule 37BB and Forms 15CA/15CB. The Income Tax Department says a previously submitted old form does not replace the new form for a post-transition remittance where a new form is required. Consider whether there is a payment to a non-resident within the rule, whether the sum is chargeable in India and whether an exception applies. A transfer of one’s own funds and the underlying sale, interest or rent can raise different tax questions.
| Decision | Tax or bank document | What to check |
|---|---|---|
| Chargeable payment within the prescribed ₹5 lakh aggregate threshold for the year | Form 145 Part A; historically Form 15CA Part A | Aggregate applicable payments for the statutory period. The FEMA limit and the tax-form threshold measure different things. |
| Chargeable payment above ₹5 lakh with an applicable Assessing Officer certificate or order | Form 145 Part B; historically Form 15CA Part B | Check that the order or certificate applies to the payment and retain its details. |
| Chargeable payment above ₹5 lakh using a chartered accountant certificate | Form 146 and Form 145 Part C; historically Form 15CB and Form 15CA Part C | The accountant determines and documents chargeability and withholding as prescribed. A certificate is not a general assurance that the remitter has no other tax liability. |
| Non-chargeable payment within the reporting rule | Form 145 Part D or historical Form 15CA Part D if required | Test the exceptions in Rule 220(3) or Rule 37BB(3). If a reporting exception applies, a tax form may not be due; the bank may still request a declaration or supporting evidence. |
| Outward foreign exchange transaction or internal transfer | Bank’s Form A2 process where applicable, or its internal NRO-to-NRE transfer request and declarations | Use the authorised dealer’s current channel, confirm the purpose code from the facts, and keep the bank’s acknowledgement. Bank documentation and portal reporting are separate. |
LRS tax collection does not follow the funds
LRS is for resident individuals. A qualifying NRO remittance by a non-resident under the Remittance of Assets Regulations is not an LRS remittance and does not attract the LRS tax collection at source merely because funds leave India. Apply the applicable law separately to a resident donor’s own transaction and to any withholding or tax on the underlying income. If the bank flags LRS collection on an NRO remittance, ask it to confirm the classification and statutory basis.
Four worked examples
The examples are hypothetical. For a foreign wire use the actual authorised dealer rate and charges; for an NRO-to-NRE rupee credit, use the bank’s USD equivalent only where needed to test the facility.
1. Inherited property: USD 600,000 from September 2024 sale proceeds
Rajiv, an eligible NRI, inherits a Delhi house in 2022 and sells it in September 2024 for ₹5,40,00,000. Assume a valid historical section 197 certificate authorises withholding at 3.5% on the stated gross consideration. The buyer deducts ₹18,90,000 and the NRO credit is ₹5,21,10,000. The bank’s source review includes the inheritance, title, sale deed, NRO credit and certificate. Reconcile the final gains and tax calculation separately; the withholding rate does not establish the final tax.
| Item | Calculation | Result |
|---|---|---|
| Annual use | USD 1,000,000 less USD 600,000; assume no earlier use in FY 2024–25 | USD 400,000 remains |
| Rupee cost at ₹83.50/USD | 600,000 × ₹83.50 | ₹5,01,00,000 before charges |
| NRO proceeds left | ₹5,21,10,000 less ₹5,01,00,000 | ₹20,10,000 before charges |
For this historical remittance, assess Rule 37BB on the remittance itself and use the old forms only as applicable. Do not automatically select Part C because the underlying property sale attracted withholding.
2. Accumulated rent and deposit interest: a ₹42 lakh NRO-to-NRE credit
Sunita’s NRO balance consists of ₹30 lakh in rental receipts and ₹12 lakh in bank interest receipts accumulated over three years, assumed to be net balances available after applicable payments and withdrawals. Reconcile gross taxable income and actual withholding to source records and returns. The bank should confirm whether it classifies the funds as current income for a separate permissible credit or as accumulated balances under the USD 1 million route. If the latter applies and the bank uses an illustrative ₹84/USD, ₹42,00,000 consumes USD 50,000 of available headroom. The original Australian-dollar comparison, at ₹55/AUD, gives AUD 76,363.64 for scale only. An internal ₹42 lakh transfer does not convert the credit into Australian dollars; check the bank’s documentation and fees.
3. Securities proceeds: two financial years
Assume Alok has ₹12,50,00,000 in eligible net proceeds from an Indian portfolio in February 2024 and has not used the facility in either relevant financial year. Use a constant illustrative ₹83.33/USD before fees. The balance buys about USD 1,500,060 before charges, exceeding one year’s limit by about USD 500,060. For a USD 1,500,000 target he could plan the following two tranches through the same authorised dealer, subject to actual eligibility and rates.
| Date | Financial year | USD | Rupees before charges | Unused annual limit |
|---|---|---|---|---|
| 15 March 2024 | 2023–24 | 800,000 | ₹6,66,64,000 | USD 200,000 |
| 18 April 2024 | 2024–25 | 700,000 | ₹5,83,31,000 | USD 300,000 |
| Total across 34 days | Two separate years | 1,500,000 | ₹12,49,95,000 | Limits are separate |
At these assumptions ₹5,000 stays in NRO before charges. The historical tax reporting and actual facility headroom are checked for each transaction.
4. Terminal provident fund and gratuity
Vikram moves to Germany after 14 years of employment and receives ₹38.50 lakh from a provident fund and ₹20 lakh in gratuity, totalling ₹58.50 lakh. For a historical payment under the 1961 Act, verify the recognised fund’s conditions and qualifying service under section 10(12) and Rule 8 of Part A of the Fourth Schedule, plus any separate taxable interest component. For gratuity, apply the relevant limb of section 10(10), including any applicable service and salary formula, prior exemption and ceiling. A ₹20 lakh payment is not automatically fully exempt. Use settlement statements, payroll and tax records. If eligibility and tax treatment are established and the bank quotes ₹90/EUR, EUR 64,500 costs ₹58.05 lakh before fees, leaving ₹45,000. Check the dealer’s USD equivalent and any tax-form requirement; the example does not guarantee processing time or zero tax.
Prepare the bank file
- Confirm FEMA status, account ownership, PAN and identity or residency evidence requested by the bank.
- Trace the NRO credits and source documents and record withholding, exemptions and remaining tax separately.
- Obtain the dealer’s record of earlier use and confirm the rate, the requested currency and annual headroom. If approval or a separate FEMA route is needed, resolve that before requesting the transfer.
- Ask for the correct form or declaration for the bank’s transaction. Complete the relevant portal part or document the exception, as applicable. Keep the debit advice, remittance reference or domestic credit confirmation and reconcile any charges.
Frequently asked questions
1. Can the facility be used to send money directly to a third party overseas?
Explain the purpose and beneficiary to the authorised dealer. Repatriating an eligible balance to one’s own account is different from paying an overseas supplier, making a gift or meeting another obligation. Determine the FEMA route and tax treatment for that payment rather than treating it as ordinary own-account repatriation.
2. Can a resident gift money to an NRI relative’s NRO account?
A permitted rupee gift by a resident to an NRI or PIO relative may be credited to NRO, subject to the RBI’s relationship, LRS and banking conditions. The recipient must still document the source and qualify for any later transfer or remittance. The bank’s request for forms does not determine the statutory tax-reporting part.
3. Does the two-property limit apply to every sale?
The separate route for repatriating eligible foreign-funded purchases restricts repatriation of residential sale proceeds to no more than two properties and limits the amount under its conditions. The USD 1 million facility instead tests the eligibility of the assets and the aggregate annual amount. Do not apply one route’s tests to the other; confirm the route from acquisition and payment records.
4. How long does the authorised dealer take?
Timing depends on the bank, the source and destination, any tax or foreign exchange questions and the completeness of records. Obtain the bank’s current estimate and preserve its transfer reference. There is no guaranteed three-to-five-day outcome.
5. Does an outstanding Indian tax demand block a remittance?
Determine whether the demand affects the underlying funds or withholding, whether it is payable, and whether a stay or certificate applies. Review the facts and the bank’s requirements. An appeal, stay or accountant certificate does not automatically clear a remittance or decide unrelated tax issues.
6. What happens to NRO accounts when the holder returns to India?
Determine when FEMA residential status changes under section 2(v), considering the purpose and circumstances of the move, and promptly notify the bank. Follow the RBI deposit rules on redesignation after a return for employment, business or other circumstances indicating an intention to stay for an uncertain period. A temporary visit does not automatically change the designation.
Sources
- RBI: non-resident accounts, permissible credits and debits
- RBI A.P. (DIR Series) Circular 117: NRO to NRE transfer facility
- CBDT Notification 22/2026: Income-tax Rules, 2026, Rule 220
- Income Tax Department: Form 145 user manual
- Income Tax Department: transition from Forms 15CA/15CB to 145/146
- Income-tax Act, 1961: historical treatment of NRE interest, gratuity and recognised provident funds
- RBI Notification FEMA 13(R)/2016-RB: Remittance of Assets Regulations, regulations 4 and 6
- FEMA Non-Debt Instruments Rules, 2019: separate property-sale repatriation route
- CBDT Notification 93/2015: historical Rule 37BB
- CBDT Notification 16/2019: historical section 10(10)(iii) gratuity ceiling
- Income-tax Act, 2025: conditional NRE interest exemption in Schedule IV