What is an NRO Account? Non Resident Ordinary Account Explained

The legal system in India does not permit Indians working and earning abroad to manage their finances and transact through a normal savings account with a local Indian bank.

To solve this issue and make the lives of Non-Resident Indians living abroad more convenient, opening a Non-Resident Ordinary bank account can be the ideal solution for you.

Let's take a look at what an NRO account is, its features, and how to open one.

What is an NRO Account?

A Non-Resident Ordinary account is a bank account opened in India under a Non-Resident Indian to allow them to manage their finances and income earned abroad and earned in India.

An NRO account is ideal for NRI who primarily have foreign income but also have a few income sources in India.

What are the features of an NRO account?

Here are some features you can expect from an NRO account:

• Income earned can be deposited inside and outside of India and can be done in both foreign and Indian currency.
• NRO account can be repatriated or transferred, where the principal amount one can remit is capped at one million USD for every financial year.
• There are no restrictions regarding the source of income as long as it is earned in India, which can be rent, dividends, pensions, or interest.
• Grant a mandate to a family member or relatives residing in India, ensuring they have convenient access to funds.
• No exchange rate risks, as NRO accounts are used only on a single currency which is the Indian Rupee.

Additional benefits you may gain from an NRO account include a Non-Resident Indian family card, A local debit card, A multi-city checkbook, Internet banking, and SMS alerts. However, certain benefits can be based on the choice of the bank you choose to open an account with.

How to open an NRO account in India

With an understanding of how an NRO account works and its features, before opening an NRO account, let's take a look at some of the requirements you should be aware of.

What documents are required to open an NRO account?

You will need to provide the following documents and personal information details to set up an NRO account in India:

• Proof of identity (through a copy of your passport or identity card)
• Proof of status as a Non-Resident Indian (through a copy of your visa, residency permit, work permit, Person of Indian Origin document, or Overseas Citizen of India card)
• Proof of residence abroad (through a copy of your lease, utility bill, or bank statement)
• Proof of Indian residence address
• PIS permission letter
• Canceled check

Who is eligible to open an NRO account?

Anyone who leaves India with the intention to work in another country will have their residential status switched to an NRI automatically.

Thus, a non-resident Indian who has lived outside India for at least 120 days in a year and has spent less than 365 days in India in the past four years is eligible to open an NRO account.

Which types of account can I open with an NRO account?

You can open the following types of accounts with a Non-Resident Ordinary Bank account in India:

• A current account
• A savings account
• A term deposit account
• A special term deposit account
• A recurring deposit account

Are there any tax obligations on an NRO account?

The income earned on an NRO account is subject to 30% of the total income accrued in India as opposed to NRE accounts which are repatriable tax-free.

However, NRIs with NRO accounts can decrease their tax obligations in India by obtaining tax benefits as per the Double Taxation Avoidance Agreement that applies to many different countries including India.

How do withdrawals work?

Withdrawals from an NRO account can only be made in the Indian Rupee denomination.

This is similar to an NRE account where you can deposit foreign currency but you can only withdraw the funds in an Indian denomination.

Can you open a joint NRO account?

A Non-Resident Indian can open a joint NRO account with one or more NRIs or Indian citizens.

Therefore, setting up an NRO account may be a better option for those NRIs who want a joint account with family members back home.

This is an advantage compared to an NRE joint account which you can only open with another Non-Resident Indian.

Bottom line

An NRO account is used to manage funds generated from income sources in India.

Therefore, if you have sources of income earned in India, you should consider setting up an NRO account as an NRE account will not cater to your needs.

It simply allows you to transfer your money earned abroad to an account in India while avoiding any tax liabilities.

Having an NRO account allows you to manage your income in India easily, giving you the flexibility to access your funds at no risk.