Banking of savings, tax-free, for Gulf Indian expats clarified

NRIs can repatriate money from non-resident ordinary (NRO) accounts to tax-free non-resident external (NRE) accounts

With a weak rupee spurring a strong remittance rate moving money to India has been a major part of the non-resident Indian’s (NRIs) financial concern here in the UAE over the past month or so.

One misconception among NRIs is that they can’t repatriate money from their non-resident ordinary (NRO) account.

Emirates 24|7 can reveal that an NRI can do so.

Provided certain conditions are fulfilled, transfer of money from an NRO account to a tax-free non-resident external (NRE) account is possible.

The conditions to be met are: The NRI should hold both his NRO and NRE account with the same bank; must provide proof of source of funds that shows funds are eligible for repatriation; submit form 15CA and form 15 CB and a cheque/letter for funds transfer.

As per the Reserve Bank of India, up to $1 million can be transferred from NRO to NRE in a financial year.

Jitendra Gianchandani, Chairman, Jitendra Consulting Group, states it is now beneficial for NRIs to hold money in their NRE account, where interest rates are on par with the NRO account, besides the interest being tax-free.

“NRIs have to fill up the 15CA to transfer from NRO to NRE and get a certificate from a chartered accountant in 15CB.

“Once that procedure is done, they can transfer funds to their NRE accounts whenever they want. They don't require any permission.”

Gianchandani points out to the following advantages:

- Saving on tax ultimately increase the RoI: Interest on NRO is taxable and interest on NRE is tax free, so one can save tax of 15/30 per cent TDS and no TDS based on Double Taxation Avoidance Agreement.

- Saving on transaction costs as no need to transfer from NRO to foreign currency and from foreign currency to NRE.

Akash Singh, says: “My bank (Kotak Mahindra) recently informed me of this option. I was totally unaware of this. I will soon be transferring my funds to my NRE account since it is tax-free and I can repatriate it any time. ”

D Kavita, holding a NRO account with HDFC Bank, too was unaware of the option.

“I was under the impression that funds in NRO account could not be repatriated.

I opened an NRO fixed deposit last year as the interest rates were pretty good. But to get a tax rebate, I have submit a DTAA form every year.”

She adds: “It is much better for me to get my money transferred to my NRE account so I don’t have to take the trouble of submitting the forms every year.”

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