FEMA Deposit (Sixth Amendment) 2026: NRO-to-NRE transfers now written into Schedules 1 and 3, SNRR accounts opened via IFSC branches

On 18 June 2026 the Reserve Bank of India issued Notification No. FEMA 5(R)(6)/2026-RB, the Foreign Exchange Management (Deposit) (Sixth Amendment) Regulations, 2026. It is the sixth amendment to the Foreign Exchange Management (Deposit) Regulations, 2016 (Notification No. FEMA 5(R)/2016-RB dated 1 April 2016), and it comes into force from the date of its publication in the Official Gazette. The full text is on the RBI FEMA notifications page, signed by N Senthil Kumar, Chief General Manager.

The amendment runs to 9 numbered paragraphs. Two of them matter to almost every non-resident Indian with savings in India: paragraph 4 adds a new clause (k) to Schedule 1 so that an NRE account may be credited with a transfer from an NRO account, and paragraph 5 adds a matching clause (v) to Schedule 3 so that an NRO account may be debited for a transfer to an NRE or SNRR account. Both clauses tie the transfer to "the limit specified in Regulation 4 of Foreign Exchange Management (Remittance of Assets) Regulations, 2016". The remaining 7 paragraphs rewrite the Special Non-Resident Rupee (SNRR) account and open it to branches in an International Financial Services Centre (IFSC).

This explainer sets out what changed, how the transfer is taxed in India and abroad, and how the repatriation mechanics now read. It does not quote a rupee or dollar figure for the Regulation 4 ceiling, because the notification itself does not state one; check the current ceiling in the Remittance of Assets Regulations before you instruct your bank.

FEMA / DTAA Position

The RBI made the amendment under section 6(2) and section 47(2) of the Foreign Exchange Management Act, 1999 (42 of 1999). Section 6 governs capital account transactions, and the FEMA framework requires that a transaction be either specifically permitted by regulation or approved by the RBI. Before 18 June 2026, the NRO-to-NRE credit was handled through the Remittance of Assets route and banking practice; it now sits as an express permissible credit and debit inside the two account schedules themselves.

The table below maps each of the 9 paragraphs of the notification to its effect.

The single most important phrase is "within the limit specified in Regulation 4". The 2026 text does not create a new or separate allowance. An NRO-to-NRE transfer is treated as a use of the same Remittance of Assets ceiling that applies when NRO money is remitted abroad directly. In practical terms, rupees moved into an NRE account in, say, July 2026 reduce what you can remit abroad from NRO balances for the rest of the 2026-27 financial year.

On the treaty side, nothing in a Double Taxation Avoidance Agreement (DTAA) changes because of a FEMA amendment. FEMA decides whether money may move; the Income-tax Act and the relevant treaty decide whether the income that generated the balance is taxed. The India-USA DTAA has been effective since 12 September 1991 and the India-UK DTAA since 26 October 1993; both continue to govern the interest earned on an NRO balance before it is transferred.

The SNRR changes are the second half of the notification. Under the substituted regulation 5(4), an SNRR account may now be opened with an authorised dealer "in India or its branch outside India (including in an IFSC in India)". The definition of IFSC is borrowed from clause (g) of section 3 of the International Financial Services Centres Authority Act, 2019, which you can read on India Code. For a non-resident business routing rupee payments through GIFT City, this removes the question of whether an IFSC banking unit counts as a permitted branch.

Tax Treatment in India

A transfer from your own NRO account to your own NRE account is a movement of money between two accounts held by the same person. Under the Income-tax Act, 1961 it is not income, and no tax arises on the transfer itself. Tax attaches to the income that built up the NRO balance (rent, dividends, interest, sale proceeds), and that tax must be settled before the bank will process the debit.

Section references in this article are to the Income-tax Act, 1961, the law that applied for FY 2025-26. From tax year 2026-27 the Income-tax Act, 2025 renumbers these provisions, so match each reference to its new clause on the Income Tax Department portal before filing.

TDS on NRO income. Under section 195, tax is withheld on payments to a non-resident at the DTAA rate or the rate under the Act, whichever is lower. Your bank applies TDS on NRO interest at the time of credit, so by the time you request a transfer to NRE most of the interest component has already been taxed at source. To claim the lower treaty rate, banks typically ask for a Tax Residency Certificate from your country of residence.

Capital gains sitting in NRO. If the NRO balance includes sale proceeds, the gain was taxed when the asset was sold. The rates applicable from 23 July 2024 are set out below.

No DTAA makes capital gains on Indian assets exempt in India for these purposes. The DTAA data held for the USA and the UK both show India's long-term capital gains rate at 12.5%, so India retains its right to tax the gain before the money can move.

Surcharge and cess. Both are computed on the base tax and apply to non-residents in the same way as to residents. Health and education cess is 4% of tax plus surcharge.

What the NRE side means for future tax. Once money lands in the NRE account, interest earned on it from that point is treated differently from NRO interest, and the NRE balance is freely repatriable. That is the commercial reason most NRIs want to make the transfer. The amendment does not alter the tax status of the NRE account; it simply records that the NRO-to-NRE route is a permitted credit. Run your own figures through the NRI income tax calculator before deciding how much to move in 2026-27.

Certification before the debit. Remittances from NRO balances are processed against Form 15CA filed on the income-tax portal, with Form 15CB from a chartered accountant where required under section 195(6) and the Income-tax Rules. Because clause (v) of Schedule 3 now places the NRE transfer inside the same Regulation 4 limit, expect banks to ask for the same documentation trail for an NRO-to-NRE transfer as for a direct outward remittance.

Tax Treatment Abroad

Your country of residence usually taxes its residents on worldwide income, which means interest, rent and gains earned in an Indian NRO account may also be reportable abroad. The NRO-to-NRE transfer does not create fresh income abroad any more than it does in India; what matters is the income that was earned in India and the Indian tax already paid on it.

The relief mechanism is the foreign tax credit. Article 24 of the India-USA DTAA provides that the country of residence gives credit for Indian tax. The treaty withholding ceilings that cap the Indian tax on interest are shown below.

For a US resident, the India-USA treaty dividend rate is 15% only where the recipient holds at least 10% of the voting stock (Article 10); a portfolio investor faces 25%. A UK resident who is also arguably resident in India for the same year should look first at the Article 4 tie-breaker in the India-UK DTAA, because a dual-residence finding changes which country gives the credit.

Two timing points matter. First, if India withheld at a rate higher than the treaty ceiling (for instance, because no Tax Residency Certificate was on file), the excess is generally not creditable abroad and must be reclaimed by filing an Indian return. Second, the Indian tax year runs 1 April to 31 March, while the US tax year is the calendar year, so a transfer made in February 2027 straddles two US years and one Indian year. Keep the bank's TDS certificates for each quarter so the credit can be split correctly.

The DTAA benefit calculator shows how much of the Indian withholding a treaty rate saves before you claim the foreign credit.

Repatriation Mechanics

The amendment changes what the account schedules say, not the ceiling. The sequence for a transfer from NRO to NRE now looks like this.

1. Confirm the balance is eligible. The NRO balance should be made up of current income or assets that may be remitted under the Remittance of Assets Regulations, 2016.
2. Settle Indian tax. Interest, rent, dividends or gains in the balance must have suffered TDS under section 195 or be covered by a return.
3. Obtain Form 15CB and file Form 15CA where the rules require them for the amount.
4. Instruct the bank to debit NRO under Schedule 3, para 3(B)(v), and credit NRE under Schedule 1, para 3(k).
5. Track the running total for the financial year, because every NRO-to-NRE or NRO-to-SNRR transfer now counts against the Regulation 4 limit alongside direct outward remittances.

The NRO-to-NRE transfer calculator and the repatriation calculator let you model how much headroom is left in the year.

The SNRR rewrite in detail. Paragraph 7 of the notification deletes paragraphs 2, 5, 6, 7 and 8 of Schedule 4, which had tied SNRR accounts to specific business purposes. The substituted paragraph 1 replaces that list with a single purpose test: permissible current and capital account transactions with a person resident in India "in accordance with the rules and regulations framed under the Act", and "any bona fide transaction with a person resident outside India". New paragraph 16 adds that transactions between non-residents through SNRR accounts, which may fall outside FEMA compliance, are to be effected by the AD bank on the account holder's instructions, and those instructions "shall indicate the underlying purpose of the transfer".

For an individual NRI, the practical takeaway from paragraph 8 is that an NRO-to-SNRR transfer is governed by Schedule 3 and therefore sits within the same Regulation 4 limit as an NRO-to-NRE transfer. You cannot use an SNRR account to step around the ceiling.

If you are unsure where your money sits, our earlier explainer on why resident accounts must be redesignated as NRO covers the first step, and our guide to FEMA 3(R) rupee loans against NRE and FCNR deposits covers borrowing against the NRE balance once it is funded.

FAQ

Does the Sixth Amendment raise the amount I can move from NRO to NRE?

No. Clauses 3(k) of Schedule 1 and 3(B)(v) of Schedule 3, inserted on 18 June 2026, both say the transfer is "within the limit specified in Regulation 4" of the Remittance of Assets Regulations, 2016. The amendment writes the route into the deposit schedules; it does not increase the ceiling.

Is an NRO-to-NRE transfer taxable in India?

The transfer itself is not income under the Income-tax Act, 1961. The income that built the NRO balance is taxable, and TDS under section 195 applies at the DTAA rate or the Act rate, whichever is lower. For a US or UK resident the treaty ceiling on interest is 15%.

Do I still need Form 15CA and 15CB?

Expect to. Because the 2026 clauses place NRO-to-NRE transfers inside the same Regulation 4 limit as outward remittances, banks are likely to apply the same Form 15CA and, where required, Form 15CB process under section 195(6) that they use for remittances abroad.

Can I open an SNRR account at GIFT City?

Yes. The substituted regulation 5(4) allows any person resident outside India to open an SNRR account with an AD bank in India or its branch outside India "including in an IFSC in India", with IFSC defined by section 3(g) of the IFSCA Act, 2019.

Are capital gains in my NRO account exempt under a DTAA?

No. India retains taxing rights over gains on Indian assets: long-term gains on listed equity are taxed at 12.5% above Rs 1,25,000 a year, and short-term gains at 20%. The tax must be settled before the proceeds can be transferred to NRE.

When did the amendment come into force?

Paragraph 1(ii) of Notification No. FEMA 5(R)(6)/2026-RB, dated 18 June 2026, says the regulations come into force from the date of their publication in the Official Gazette.

Does the amendment change how NRE interest is taxed?

No. The notification amends only the FEMA (Deposit) Regulations, 2016. Tax on NRE and NRO interest continues to be governed by income-tax law, which from tax year 2026-27 is the Income-tax Act, 2025.