Friday, May 10, 2024

Detailed Guide to Compliance for Foreign Remittances: NRO, NRE Accounts, and Credit Card Payments

When dealing with foreign remittances from India, ensuring compliance with tax laws and foreign exchange regulations is crucial. This guide covers the procedures for using Non-Resident Ordinary (NRO) and Non-Resident External (NRE) accounts, making payments through credit cards, and highlights the documentation needed to establish the applicability or non-applicability of Tax Deducted at Source (TDS).

Understanding NRO and NRE Accounts

  1. NRO (Non-Resident Ordinary) Account:

    • Purpose: To manage income earned in India by non-residents.
    • Taxation: Subject to Indian income taxes.
    • Repatriation: Allows repatriation up to USD 1 million per financial year, post-tax.
  2. NRE (Non-Resident External) Account:

    • Purpose: To park income earned outside India.
    • Taxation: Not subject to tax in India.
    • Repatriation: Fully repatriable, including principal and interest without any upper limit.

Credit Card Payments for Foreign Transactions

  • Under the Liberalized Remittance Scheme (LRS): Permits remittances up to USD 250,000 per financial year for allowable transactions, including payments made via credit cards.
  • Compliance Requirements: Adherence to FEMA regulations is mandatory, and the aggregate of all foreign exchanges should not breach the prescribed LRS threshold.

Forms 15CA and 15CB: Procedures and Requirements

Form 15CB (Certification by a Chartered Accountant):

  • Objective: To certify that taxes have been considered before making any remittance.
  • Content Includes: Applicable tax rate, Double Tax Avoidance Agreement (DTAA) benefits if any, and description of the payment.

Form 15CA (Self-Declaration by the Remitter):

  • When to File: Must be submitted electronically prior to the remittance process.
  • Sections:
    • Part A: For remittances up to INR 5 lakh within a financial year.
    • Part B: Applies when the remittance is more than INR 5 lakh but covered by an order/certificate under section 197.
    • Part C: Required for remittances over INR 5 lakh, necessitating Form 15CB.
    • Part D: Used when the remittance is not subject to taxation under Indian laws.

Special Considerations: Business Payments and Personal Account Transfers

  • Business Payments Abroad:

    • Compliance with Form 15CA/15CB: Essential when transactions are taxable in India.
    • Process: Documentation verifying the business purpose and tax compliance is crucial.
  • Payments to Self Accounts Overseas:

    • Under LRS Guidelines: Declare the purpose and confirm it aligns with allowed capital or current account transactions.
    • Form Requirements: No need for Form 15CA/15CB unless the transaction involves taxable income sourced from India.

Documents for TDS Applicability or Non-applicability

  • Tax Residency Certificate: From the recipient’s country to claim benefits under DTAA.
  • PAN Card: Mandatory for transactions where TDS may apply.
  • Bank Statements/Income Proofs: To justify the nature and source of funds being remitted.
  • Chartered Accountant’s Certificate (Form 15CB): When higher remittance thresholds are involved.

Timeline and Penalties for Non-compliance

  • Timeline: Ensure that all forms and approvals are in place before initiating any remittance.
  • Penalties: Non-compliance can result in fines up to INR 1,00,000 for failures related to non-submission or incorrect disclosures.

Key Compliance Tips

  • Regular Updates: Keep abreast of RBI and tax notifications that may impact remittance rules.
  • Professional Advice: Always consult with tax and financial experts for precise compliance, especially in complex scenarios.
  • Detailed Records: Keep comprehensive records of transactions, including forms and tax receipts, to safeguard against potential audits.


Navigating the regulations around using NRO/NRE accounts and making credit card payments internationally requires a thorough understanding of the relevant laws. By adhering to the procedures and timely filing the required documentation, one can ensure seamless and compliant cross-border transactions, thereby avoiding substantial penalties.