NRO Accounts

A Non-Resident Ordinary (NRO) account is a rupee-denominated bank account designed for NRIs (Non-Resident Indians), PIOs (Persons of Indian Origin), and OCIs (Overseas Citizens of India) to manage their income earned in India while residing abroad.

This guide provides a comprehensive overview of NRO accounts, including features, benefits, eligibility, taxation, documentation, and comparisons with other NRI accounts.

What is an NRO Account?

An NRO (Non-Resident Ordinary) account is a savings or fixed deposit account that allows NRIs to manage their earnings from India, such as rent, dividends, pensions, or any other Indian source of income.

Key Features

• For Indian income: Designed to hold funds generated from Indian sources like rent, dividends, pension, and salaries.
• Repatriation limit: Funds can be transferred abroad, but only up to USD 1 million per financial year after tax compliance.
• Taxable interest: Interest earned in an NRO account is taxable in India.
• Can be held jointly: Can be jointly held with another NRI or resident Indian (close relative).
• Allows INR deposits: Unlike an NRE account, you can deposit both foreign and Indian currency into an NRO account.

Benefits of an NRO Account

Who Can Open an NRO Account?

• Eligible
  • NRIs (Non-Resident Indians)
  • PIOs (Persons of Indian Origin)
  • OCIs (Overseas Citizens of India)
• Not Eligible
  • Resident Indians
  • Foreign nationals (unless they hold OCI/PIO status)

Types of NRO Accounts

Tip: If you earn money in India (rent, pension, dividends, etc.), an NRO savings account is essential. If you want higher returns, opt for an NRO fixed deposit.

How to Open an NRO Account?

Step 1: Choose a Bank

Most major Indian banks offer NRO accounts, including:

• State Bank of India (SBI)
• HDFC Bank
• ICICI Bank
• Axis Bank
• Kotak Mahindra Bank
• Bank Of Baroda

Step 2: Gather Required Documents

To open an NRO account, you need:

• Passport copy (with valid visa page).
• Proof of NRI status (employment visa, work permit, residency permit, etc.).
• Indian address proof (if applicable).
• Foreign address proof (utility bill, driving license, bank statement, or rental agreement).
• PAN Card (mandatory for NRO accounts).
• Initial deposit (varies by bank, typically ₹10,000 to ₹50,000).

Step 3: Submit Application

• Online Mode: Fill out the bank’s NRO account application form online and upload scanned documents.
• Offline Mode: Visit a bank branch in India or a designated overseas branch.

Step 4: KYC & Verification

• Some banks require notarized or attested documents by the Indian Embassy or a local bank.
• A video KYC process may also be required.

Step 5: Fund the Account

• Deposits can be made in INR or foreign currency.
• Foreign currency deposits will be converted to INR at the prevailing exchange rate.

How to Transfer Money to an NRO Account?

• From India: Direct INR deposits via cash, cheque, or bank transfer.
• From Abroad: Wire transfers, SWIFT, remittance services.
• Through NRE Account: You can transfer funds from an NRE to an NRO account but not vice versa.

Taxation on NRO Accounts

NRO Account Tax in India:

• Interest earned on an NRO account is taxable in India.
• Tax Deducted at Source (TDS) applies at 30% + cess + surcharge.
• You can claim DTAA (Double Taxation Avoidance Agreement) benefits to reduce TDS.

Taxation Abroad:

• Some countries (like USA, UK, Canada, Australia) may also tax your NRO interest, so check local tax laws.
  Claim DTAA relief to avoid double taxation.

Tip: Submit Form 15CA/15CB for repatriation and DTAA forms to reduce TDS.

How to Repatriate (Transfer) Funds from an NRO Account?

You can repatriate up to USD 1 million per financial year. Steps for repatriation are as follows:

• Submit Form 15CA (online declaration of remittance).
• Get Form 15CB (certified by a Chartered Accountant).
• Bank processes the transfer after verification.

Tip: If you need to send large amounts abroad, check with a tax expert to comply with RBI regulations.

Points to Consider When Opening an NRO Account

• Choose a bank that offers hassle-free online services and overseas support.
• Evaluate interest rates for NRO fixed deposits across banks.
• Consider banks with mobile apps supporting international access and alerts.

Common Mistakes to Avoid

• Not submitting Form 15CA/15CB during fund repatriation.
• Assuming NRO interest is tax-free.
• Using NRO account for foreign income (use NRE or FCNR instead).

NRO Account for Investment Purposes

• Use your NRO account to invest in Indian mutual funds, stocks (via PIS route), real estate, and term deposits.
• Income from these investments (rent, dividends, capital gains) must be routed through the NRO account.

Important Regulatory Guidelines

• RBI and FEMA (Foreign Exchange Management Act) regulate NRO accounts.
• Banks must follow KYC norms and periodic document revalidation.
• TDS certificates (Form 16A) are provided by banks annually.

Conclusion

An NRO account is ideal for NRIs earning income from India and needing a secure and regulated way to manage funds.

• Best for: NRIs with rental income, pensions, or Indian investments.
• Taxable: Interest earnings are taxed in India but can benefit from DTAA.

FAQs