What is nro account

What is an NRO Account?

An NRO (Non-Resident Ordinary) account is a rupee savings or current account offered by Indian banks exclusively to Non-Resident Indians (NRIs) and persons of Indian origin. It enables NRIs to manage their rupee funds and income earned from Indian sources while residing outside India. The account bridges banking needs for those maintaining financial connections to India.

Purpose and Eligibility

NRO accounts are designed for NRIs who have income sources within India, such as rental income from property, interest from deposits, dividends, or salary from Indian employers. Eligibility requires proof of Non-Resident status, which typically means being outside India for more than 183 days in a financial year. Persons of Indian origin, including Indian nationals and those of Indian descent, may also open NRO accounts.

Account Features and Limits

NRO accounts allow unlimited deposits in Indian Rupees. However, withdrawals are regulated and typically limited to rupees earned from Indian sources. Account holders can receive remittances from abroad, though these are generally credited to NRE (Non-Resident External) accounts rather than NRO accounts. Balances in NRO accounts are not freely repatriable outside India.

Taxation and Compliance

Income earned in NRO accounts, particularly interest and dividends, is taxable in India. Tax Deducted at Source (TDS) is applied at specified rates. Account holders must comply with Foreign Exchange Management Act (FEMA) regulations and provide necessary documentation to their banks regarding their resident status and income sources.

NRO vs. NRE Accounts

The key distinction is that NRO accounts hold rupees from Indian sources and are non-repatriable, while NRE (Non-Resident External) accounts hold foreign currency or rupees from foreign remittances and are freely repatriable. Many NRIs maintain both account types to manage different financial requirements and take advantage of each account's benefits.