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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