NRO to NRE transfers now written into FEMA: what the June 2026 Deposit (Sixth Amendment) Regulations change for NRIs

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 amends the Foreign Exchange Management (Deposit) Regulations, 2016 (Notification No. FEMA 5(R)/2016-RB of 1 April 2016) in 9 numbered paragraphs, and it comes into force from the date of its publication in the Official Gazette. The notification is signed by N Senthil Kumar, Chief General Manager, Foreign Exchange Department.

For most non-resident Indians the headline change sits in 2 short clauses. The list of permitted credits to an NRE account now includes a transfer from an NRO account, and the list of permitted debits to an NRO account now includes a transfer to an NRE or SNRR account. Both are capped by the same ceiling: the limit in Regulation 4 of the Foreign Exchange Management (Remittance of Assets) Regulations, 2016, which is the USD 1 million per financial year facility. It is not unlimited and it is not tax-free.

FEMA / DTAA Position

The amendment is made under sub-section (2) of section 6 and sub-section (2) of section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999). Section 6 deals with capital account transactions, and the FEMA framework treats a movement of funds from a non-repatriable rupee balance to a repatriable one as a regulated event, which is why the clause had to be written into the Deposit Regulations rather than left to banking practice.

What changed, paragraph by paragraph

The wording of new clause (k) in Schedule 1 is short: "Transfer from NRO account within the limit specified in Regulation 4 of Foreign Exchange Management (Remittance of Assets) Regulations, 2016." The mirror clause (v) in Schedule 3, paragraph 3(B), reads: "Transfer to NRE or SNRR account within the limit specified in Regulation 4". The 2 clauses are deliberately tied to the same 2016 regulation, so an NRO to NRE transfer and an outward remittance from NRO draw on 1 common annual ceiling.

The USD 1 million ceiling

Regulation 4 of the Remittance of Assets Regulations, 2016 is the facility under which an NRI or PIO may remit up to USD 1 million per financial year from NRO balances, sale proceeds of assets or inherited assets. RBI's FAQs say a remittance above that figure needs RBI approval, that the holder gives an undertaking, and that the amount is subject to applicable tax. Our USD 1 million NRO repatriation explainer covers the outward side.

Because the 2026 clauses import that limit, an NRO to NRE transfer of USD 400,000 in FY 2026-27 leaves USD 600,000 of headroom for the rest of that financial year, whether the balance is later moved to NRE or wired abroad directly. A reader who has already remitted USD 1 million from NRO in the same year cannot use the new clause to move more.

The SNRR changes

The Special Non-Resident Rupee (SNRR) account changes are wider than the NRO clause. Regulation 5(4) now lets "any person resident outside India" open, hold and maintain an SNRR account, including at an AD branch in an IFSC in India. Para 10 of Schedule 4 previously barred transfers from NRO to SNRR; from the 2026 amendment such transfers follow Schedule 3, which itself now carries the Regulation 4 cap.

Where the DTAA fits

A tax treaty does not govern whether money can move between 2 Indian bank accounts; that is purely a FEMA question. The Double Taxation Avoidance Agreement becomes relevant to the income sitting in the NRO account, such as interest, rent, dividends or capital gains, which India has the first right to tax before any transfer is made.

Tax Treatment in India

The transfer itself is a movement of the account holder's own money between 2 accounts in their name. The tax question is whether the income that built up the NRO balance has already been taxed. RBI's FAQs on the Remittance of Assets facility say the remittance is "subject to applicable tax", and banks treat the new NRO to NRE route the same way.

TDS under Section 195

Payments to a non-resident attract withholding under Section 195 of the Income-tax Act, 1961. The Oquilia statute catalogue summarises it as withholding "under DTAA rates or rates in IT Act, whichever is lower". NRO interest, rent and other income credited to the NRO account typically have TDS deducted at source before they land in the account, so the balance that is later moved to NRE is generally post-tax money.

Slabs, surcharge and cess for FY 2025-26

An NRI who files an Indian return is taxed at the regular slab rates on income other than special-rate capital gains. The FY 2025-26 figures in Oquilia's rate configuration are:

Surcharge is 10% of tax on income between Rs 50 lakh and Rs 1 crore, 15% between Rs 1 crore and Rs 2 crore, and 25% above Rs 2 crore in the new regime, which caps it at 25%. Health and education cess is 4% of tax plus surcharge.

Capital gains that often feed an NRO account

Sale proceeds of Indian assets are one of the 3 sources Regulation 4 names, so capital gains frequently sit behind a large NRO balance. Under the Budget 2024 rules effective 23 July 2024, long-term gains on listed equity are taxed at 12.5% above an exemption of Rs 1,25,000, short-term gains on listed equity at 20%, and long-term gains on property and gold at 12.5% without indexation. For property acquired before 23 July 2024 a grandfathered option of 20% with indexation remains.

A worked example: an NRI sells a flat in Pune in FY 2026-27 and books a long-term gain of Rs 80 lakh. At 12.5%, the tax is Rs 10 lakh before surcharge and cess; surcharge at 10% (the gain falls in the Rs 50 lakh to Rs 1 crore band) adds Rs 1 lakh, and cess at 4% on Rs 11 lakh adds Rs 44,000. Once the buyer's TDS is credited and any balance settled, the net proceeds can be moved to NRE under clause (k), subject to the USD 1 million annual cap. Run your own figures through the NRI tax calculator.

Interest after the transfer

Interest earned on an NRE balance is treated differently from NRO interest in the Income-tax Act; check the current text of Section 10 on incometax.gov.in before relying on it. The 2026 amendment does not change any income-tax provision, and the CBDT has issued no circular tied to Notification FEMA 5(R)(6)/2026-RB.

Tax Treatment Abroad

Most countries where NRIs live tax their residents on worldwide income, so the interest, rent or gain earned in India may be taxed twice. The DTAA settles which country taxes first and caps India's rate on certain income, and the residence country then gives a credit for Indian tax paid.

Treaty rates for 2 common corridors

Neither treaty makes capital gains on Indian assets exempt in India. Under the India - USA treaty, dividends are taxed at 15% only where the recipient holds at least 10% of the voting stock; portfolio holders face 25% under Article 10. Article 24 of the India - USA treaty provides for a foreign tax credit in the country of residence, and the India - UK treaty contains a tie-breaker rule for dual residents in Article 4.

Practical interaction with the transfer

Moving money from NRO to NRE does not create new income abroad, just as it does not in India; the reportable items are the underlying interest, rent or gain in the year they arise. A US-resident NRI who paid 15% Indian tax on NRO interest under the treaty would generally claim that amount as a credit under Article 24, and our DTAA benefit calculator and foreign tax credit calculator model the arithmetic. Keep the Form 16A or TDS certificate and the Form 26AS entries, because the residence country usually asks for proof of Indian tax paid.

Repatriation Mechanics

How the 3 accounts compare after June 2026

The FCNR deposit is not touched by the 2026 notification. The amendment only names NRE and SNRR as eligible destinations for an NRO debit.

Step by step at the bank

1. Confirm headroom. Add up every NRO remittance abroad and every NRO to NRE or SNRR transfer already made in the current financial year (1 April to 31 March). The total plus the new transfer must stay within USD 1 million.
2. Show the source. The 3 sources named in Regulation 4 are NRO balances, sale proceeds of assets and inherited assets. Keep the sale deed, the will or succession certificate, or the bank statements that show where the money came from.
3. Give the undertaking. RBI's FAQs say the remittance needs the holder's undertaking. Banks also ask for tax documentation; for remittances to non-residents this is usually Form 15CA and, where required, Form 15CB from a chartered accountant.
4. Let the AD bank execute. The authorised dealer debits NRO under clause (v) of Schedule 3, para 3(B), and credits NRE under clause (k) of Schedule 1, para 3.
5. Keep the trail. Retain the bank advice and the tax papers for at least the period your residence country can reopen a return.

Our repatriation calculator and NRO to NRE calculator help estimate the net amount after tax. Above USD 1 million in one financial year, RBI approval is still needed, exactly as before 18 June 2026.

What the change does not do

It does not raise the USD 1 million ceiling, it does not exempt NRO income from tax, and it does not convert an NRO account into an NRE account. It also does not touch the resident-side LRS, which is a separate scheme for persons resident in India.

FAQ

Can I now move my entire NRO balance to NRE?

Only up to USD 1 million per financial year, counted together with any NRO remittances abroad in the same year. The cap comes from Regulation 4 of the Remittance of Assets Regulations, 2016, which both new clauses cite. Anything above that needs RBI approval.

Is the NRO to NRE transfer tax-free?

No. The move itself is a transfer of your own money, but RBI's FAQs say the facility is subject to applicable tax, and the bank will want evidence that tax on the underlying interest, rent or gain has been paid or deducted under Section 195.

When did the new rule take effect?

The notification is dated 18 June 2026 and says it comes into force from the date of its publication in the Official Gazette. RBI's FEMA notifications page also lists a corrigendum alongside it; check the current text on rbi.org.in before acting.

Does the change apply to FCNR(B) deposits?

No. The 2026 notification amends Schedule 1 (NRE), Schedule 3 (NRO) and Schedule 4 (SNRR) of the 2016 Deposit Regulations. Schedule 2, which governs FCNR(B), is not amended.

Who can open an SNRR account after June 2026?

Regulation 5(4), as substituted by paragraph 3 of the notification, lets any person resident outside India open one with an AD bank in India or its branch outside India, including a branch in an IFSC in India. Transfers into SNRR from NRO count against the same USD 1 million annual limit.

Do I still need Form 15CA and 15CB?

Banks generally continue to ask for them when money moves out of NRO for a non-resident's benefit. The FEMA amendment of 18 June 2026 does not change any income-tax form or procedure.

Will my country of residence tax the transfer?

The transfer is not itself income; the residence country taxes the interest, rent or gain in the year it arose. Under the India - USA treaty (Article 24) and similar provisions, Indian tax paid at up to 15% on interest can generally be claimed as a foreign tax credit.

This explainer is based on RBI Notification No. FEMA 5(R)(6)/2026-RB dated 18 June 2026 and Oquilia's rate configuration for FY 2025-26. It is general information, not tax or legal advice; consult a chartered accountant or your AD bank before moving funds.