NRO to Foreign Remittance Tax – Rules, Limits, and Compliance Explained

NRO to foreign remittance tax is one of the most misunderstood areas for Non-Resident Indians (NRIs). While remittance of funds from an NRO account to a foreign bank account is legally permitted, it is subject to strict tax and regulatory compliance under FEMA and the Income-tax Act, 1961.

This article explains the legal framework, tax implications, TDS requirements, Form 15CA/15CB compliance, and a practical checklist to ensure error-free remittance.

Legal Framework Governing NRO to Foreign Remittance

Remittance from an NRO account is governed primarily by the Foreign Exchange Management Act (FEMA) and RBI Master Directions.

Key FEMA Rules

  • NRIs are permitted to remit up to USD 1 million per financial year
  • The limit applies per individual, not per account
  • Funds must be eligible credits in the NRO account
  • Remittance is allowed only after payment of applicable Indian taxes

Eligible Credits in NRO Account

  • Rent received from property in India
  • Pension income
  • Dividend or interest income
  • Sale proceeds of assets (subject to conditions)
  • Inheritance or legacy amounts

Taxability of Amounts Remitted from NRO Account

A common misconception is that remittance itself is taxable. This is incorrect.

👉 Taxability depends on the nature and source of income, not on remittance.

1. Current Income

Examples:

  • Rent
  • Pension
  • Interest

These are taxable in India and must suffer tax before remittance.

2. Capital Receipts

Examples:

  • Sale proceeds of property
  • Sale of shares or mutual funds

Taxability depends on:

  • Holding period (long-term / short-term)
  • Applicable capital gains tax
  • Exemptions claimed, if any

3. Inheritance

Amounts received by way of inheritance are not taxable in India.
However, documentary proof is mandatory for remittance.

TDS and Section 195 Implications

When Does Section 195 Apply?

Section 195 applies when:

  • The remitted amount is chargeable to tax in India
  • Payment is made to a non-resident

Since the remittance is being made by an NRI from his own NRO account, banks insist on tax clearance to ensure compliance.

Practical Position

  • If tax is applicable → TDS must be deducted or tax paid
  • If income is exempt → documentary justification required
  • DTAA benefits can be claimed, where applicable

Form 15CA and 15CB – Complete Explanation

Banks will not process foreign remittance without Form 15CA, and in many cases, Form 15CB.

Form 15CA

This is a self-declaration by the remitter.

Parts of Form 15CA:

  • Part A – Remittance ≤ ₹5 lakh (rare in NRO cases)
  • Part B – When AO order obtained
  • Part C – When Form 15CB is required
  • Part D – When remittance is not chargeable to tax

Form 15CB

  • Issued by a Chartered Accountant
  • Certifies:
    • Nature of remittance
    • Taxability
    • TDS compliance
    • DTAA applicability

👉 Most NRO remittances require both Form 15CA (Part C) and Form 15CB.

RBI USD 1 Million Limit – Important Clarifications

  • Limit is USD 1 million per financial year
  • Includes all capital and current account remittances
  • Excludes certain current income remittances approved separately
  • Bank will insist on a declaration of cumulative remittances

Practical Checklist Before NRO Remittance

Before initiating remittance, ensure the following:

Income & Tax Compliance

  • Identify nature of funds (rent / sale / inheritance)
  • Ensure correct tax computation
  • Pay applicable taxes or TDS
  • Claim DTAA relief, if applicable

Documentation

  • PAN card
  • Passport and visa
  • NRO bank statement
  • Sale deed / inheritance documents (if applicable)
  • Tax payment challans
  • CA certificate (Form 15CB)

Forms

  • Form 15CA filed online
  • Form 15CB uploaded by CA
  • Acknowledgment copies provided to bank

Common Mistakes That Cause Remittance Delays

  • Treating remittance as non-taxable without analysis
  • Incorrect selection of Form 15CA Part
  • Non-deduction of TDS where applicable
  • Missing DTAA documentation
  • Exceeding USD 1 million limit unknowingly

Banks routinely reject or delay remittances due to these errors.

Can Remittance Be Made Without Form 15CB?

Only in limited situations:

  • When income is clearly exempt
  • When covered under specific RBI exemptions
  • Subject to bank discretion

As a rule, expect Form 15CB to be mandatory.

Conclusion

NRO to foreign remittance tax compliance is not optional. While FEMA permits remittance, the Income-tax Act ensures that India’s tax dues are settled first.

A structured approach—correct tax analysis, timely payment, accurate Form 15CA/15CB filing, and proper documentation—ensures smooth remittance without regulatory issues.

For high-value remittances or capital transactions, professional certification is strongly recommended to avoid future scrutiny.

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