FEMA (Foreign Exchange Management Act) governs all cross-border money flows for Indian residents and NRIs. While income tax covers what you owe, FEMA covers how money can move across borders. Violations attract severe penalties — up to 3× the amount involved.
NRE vs NRO vs FCNR: Which Account for NRIs?
| Feature | NRE Account | NRO Account | FCNR Account |
|---|---|---|---|
| Currency | Indian Rupees (₹) | Indian Rupees (₹) | Foreign Currency (USD, GBP, etc.) |
| Source of funds | Foreign earnings only | India earnings / NRI foreign income | Foreign earnings only |
| Repatriation | Fully repatriable (principal + interest) | Restricted — up to USD 1 million/year | Fully repatriable |
| Interest taxability in India | Tax-free (for NRIs) | Taxable in India | Tax-free (for NRIs) |
| Joint account | With another NRI only | With resident Indian permitted | With another NRI only |
| Best used for | Parking foreign savings in India | India rental income, dividends, FDs | Parking savings in foreign currency |
Repatriation from NRO Account — Annual Limit
- USD 1 million per financial year limit for NRO repatriation
- Required: CA Certificate in Form 15CB (certifying tax compliance)
- Required: Form 15CA filed online before bank transfer
- Funds must be post-tax: TDS on interest/rent must be deducted before repatriation
- Property sale proceeds: Also subject to USD 1M annual limit (per person)
Common FEMA Violations by NRIs
- Holding NRE/FCNR accounts after returning to India permanently — must convert to resident accounts within 3 months
- Renting out property but receiving rent in NRE account — rental income must go to NRO (India income)
- Buying agricultural land / plantation property — NRIs cannot purchase these under FEMA (only by inheritance)
- Repatriating without Form 15CB/15CA — bank may reject or you face FEMA violation
- Not declaring foreign assets in ITR (Schedule FA) — both FEMA and income tax violation