NRO Account

What is an NRO Account?

An NRO (Non-Resident Ordinary) account is a type of bank account in India specifically designed for Non-Resident Indians (NRIs) to manage their income earned within India. This includes income sources like rent, dividends, pensions, and proceeds from the sale of immovable property.

Some features of NRO account:

• Can be opened as a savings account or a current account.

• Can be held jointly with another NRI or a resident Indian.

• Deposits can be made in Indian and foreign currencies.

• Funds are maintained in Indian Rupees (INR).

• Interest earned on the account is taxable in India.

• The principal amount can be repatriated up to a certain limit each financial year.

Who Can and Can Not Open an NRO Account?

An NRO account can be opened by the following individuals:

• Non-Resident Indians (NRIs)

• Persons of Indian Origin (PIOs)

• Overseas Citizens of India (OCIs)

• Foreign nationals who are not citizens of India

• Residents of Nepal and Bhutan NRIs (including PIO/OCI) residing in these countries are not eligible.

• Foreign Nationals Visiting India can open an NRO account for a maximum of 6 months. It cannot be credited with local funds (except interest).

• Citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal, and Bhutan have specific restrictions on remittance facilities related to the sale of immovable and financial assets.

Benefits of NRO Account

Below are the benefits of NRO accounts:

• Effortlessly handle income earned in India, such as rent, dividends, or pension, while living abroad.

• Deposit funds in both Indian Rupees (INR) and foreign currencies, offering convenience for diverse income sources.

• Earn competitive interest rates on savings, fixed, or recurring deposits, helping your funds grow.

• Repatriate up to $1 million per financial year for genuine purposes, including education, medical expenses, or financial investments abroad.

• Easily comply with Indian tax regulations, with TDS applied at applicable rates, ensuring hassle-free financial management.

• Open accounts jointly with another NRI or a resident Indian, adding flexibility for financial planning.

How to Open an NRO Account?

To open an NRO account, you usually need to follow these steps:

• Choose a Bank: Select a bank in India that offers NRO accounts. Many major banks, both public and private, provide this service.

• Gather Required Documents:

  • Proof of Identity

  • Proof of Address (Overseas address proof like a utility bill or rental agreement)

  • PAN Card

  • Visa/Work Permit (If applicable)

  • KYC (Know Your Customer) Documents (As required by the bank)

• Visit a Branch or Open Online:

  • In-Person: Visit a branch of your chosen bank in India or abroad.

  • Online: Many banks offer online NRO account opening facilities. You can fill out the application form and submit the required documents online.

• Fill the Application Form: Provide accurate information about your personal details, income sources, and purpose of the account.

• Submit Required Documents: Submit the scanned copies of the required documents as per the bank's guidelines.

• Complete the Verification Process: The bank may require additional verification, such as a video call or physical document submission.

• Account Activation: Once the verification process is complete, your NRO account will be activated.

Permissible Credits and Debits in NRO Account

An NRO (Non-Resident Ordinary) account is designed to manage the income earned by NRIs in India. It offers a structured way to receive and manage funds from abroad, as well as make payments within India. Below is an overview of the permissible credits and debits for an NRO account.

Permissible Credits:

• Foreign Inward Remittances: Funds received from abroad through normal banking channels in freely convertible currency are allowed as credits to the NRO account.

• Foreign Currency Travellers Cheques/Notes: Accepted during temporary visits of the NRI to India.

• Transfers from Non-Resident Banks: Transfers made from rupee accounts of non-resident banks can be credited to the NRO account.

• Legitimate Dues in India: This includes income such as rent, dividend, pension, interest, and sale proceeds from assets (including immovable property) acquired either from rupee/foreign currency funds or by inheritance/legacy.

Permissible Debits:

• Local Payments in Rupees: Payments for local investments, as well as for day-to-day transactions, can be made from the NRO account, provided they comply with the Reserve Bank of India’s relevant regulations.

• Remittance Outside India: Current income like rent, dividends, pension, and interest earned in India can be remitted to the account holder's foreign bank account.

• Annual Remittance Limit: NRIs and PIOs (Persons of Indian Origin) can remit up to USD 1 million per financial year from their NRO account balances. This amount includes the sale proceeds of immovable properties, subject to the payment of applicable taxes.

Is the Amount Held Under NRO Deposit Repatriable?

The funds in a Non-Resident Ordinary (NRO) account are partially repatriable, subject to specific guidelines. Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) can remit up to USD 1 million per financial year from their NRO account balances. This limit also includes the sale proceeds of immovable properties owned by them in India.

However, this repatriation is contingent upon the payment of applicable taxes as per Indian regulations. Beyond the limit of USD 1 million per year or for purposes other than current income, prior approval from the Reserve Bank of India (RBI) is mandatory for repatriating funds from the NRO account.

Tax Impact on NRO Account

Tax Deducted at Source (TDS)

• Interest earned on Fixed Deposits (FDs), Recurring Deposits (RDs), and Savings Accounts in an NRO account is subject to TDS at 30% plus applicable surcharge and cess.

• If your country of residence has a Double Taxation Avoidance Agreement (DTAA) with India, a lower TDS rate may apply. To avail of this benefit, submit the following:

  • A Tax Residency Certificate (TRC).

  • An online copy of Form 10F.

  • A declaration confirming the absence of a Permanent Establishment (PE) in India.

Mandatory PAN Card Requirement

If your physical cash deposits or withdrawals across all accounts during a financial year (April-March) exceed ₹2 million, obtaining a Permanent Account Number (PAN) is mandatory.

Proper documentation ensures compliance and helps avoid higher tax rates or penalties. Always consult a tax advisor for guidance tailored to your financial situation.

Conclusion 

NRO accounts simplify financial management for NRIs by offering flexible banking solutions and tax compliance. Whether for income deposits or withdrawals, these accounts provide a secure and convenient way to stay connected with your financial interests in India.