NRI EDGE

NRO Accounts: Explained

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Understand what is an NRO account
Know the process and eligibility to open an NRO account

The below content is purely for informational purposes and is not intended to constitute advisory of any kind. The position reflected in this article has been updated as of November 15, 2023.

Many Non-Resident Indians (NRIs) have a primary source of income overseas while also generating income within India. An Non-Resident Ordinary account (NRO) is suitable for them to manage these earnings, local expenses and investments in India.

An NRO account is a Rupee-denominated bank account suitable for NRIs, Persons of Indian Origin (PIOs) and Oversea Citizens of India (OCIs), who wish to deposit income earned in India, such as rent, dividends, pensions, gifts and proceeds from the sale of immovable property (excluding agricultural land/ farmhouse, plantation property).

As per the prevailing Foreign Exchange Management Act (FEMA) regulations, once you get an NRI status, you must mandatorily convert your existing resident savings account to an NRO account.

Further, you can also open a new NRO account with an Indian bank of your choice since it is permitted to hold multiple NRO accounts across banks.

Open an NRO Savings Account

Understanding deposits in an NRO account

Domestic income or funds originating from India can be deposited in an NRO account. In this context, it may be important for you to know the below classifications.

Current income: It includes rental income, dividends from investments, pension, interest from Fixed Deposits (FD) and bank accounts in India, among others. The funds from current income are freely repatriable, i.e., you can transfer the funds to an overseas account without any limits.
Capital income: It includes proceeds from maturity of FD, sale of property, redemption of mutual funds, shares etc. You can repatriate capital funds up to USD 1 million per Financial Year (April–March) cumulatively for all your NRO accounts held in India. Fund transfers from your NRO account to your NRE account also fall under the USD 1 million limit.

Foreign income or funds originating from a foreign country (in foreign currency) can also be deposited in an NRO account. These funds will be converted into Indian Rupees as per prevailing currency conversion rates. Therefore, you can withdraw funds only in Indian currency.

Please note, there is no upper limit on the amount of money that can be deposited in your NRO accounts.

You can also open an NRO Recurring Deposit (RD) account and an NRO Fixed Deposit (FD) account that will allow you to make a recurring or a lumpsum deposit from your NRO savings account respectively. For ICICI Bank customers, the tenure for an NRO FD ranges from seven days to 10 years and for an NRO RD, it ranges from six months to 10 years. Please note, the permitted tenure may vary from bank to bank.

Tax Deducted at Source (TDS) is applicable on the interest accrued on the principal amount held in the NRO deposits.

Features of an NRO account at a glance;

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Who can apply for an NRO account?	Only NRIs/PIOs/OCIs can open an NRO account. Under prevailing FEMA regulations, you will be considered an NRI if: You are residing overseas (except Nepal or Bhutan) for more than 182 days in one financial year; or You have demonstrated an intent to go abroad or reside outside of India for an uncertain period: Resident Indian professionals before going abroad for employment Students planning to study abroad Seafarers who work on international ships
Account features	Can be opened as a savings as well as a current account. Allows you to make fixed and recurring deposits. Opened jointly with two or more NRIs/PIOs or a resident Indian on a former or survivor basis.* The resident joint holder can only operate the account with a Power of Attorney (PoA)/mandate from the primary NRI account holder.
Documentation requirements**	Valid passport; Valid work permit/employment visa/admission letter, etc. PIOs need to submit the duly signed and filled form for declaration of status: Address proof: Valid driving license, Voter’s ID, Aadhaar card, etc; Permanent Account Number (PAN) card, or in the absence of a PAN card, Form 60 for opening a savings bank account; However, a PAN card is mandatory to open a current account. For seafarer's account: Copy of passport and visa, contract letter, declaration letter, etc; Foreign Account Tax Compliance Act (FATCA) declaration as applicable for the United States (US) or Common Reporting Standard (CRS) for UK, Canada or any of the 100+ countries that have adopted CRS.
Permissible credits into the account	Inward remittances Transfers from other NRO/NRE accounts Legitimate dues in India such as sale/maturity proceeds of your investments in India, rental income, etc. Rupee gift/loan received (within limits prescribed under Liberalised Remittance Scheme) from resident relative***
Permissible payments from the account	Payments in India Outward remittances of current income without limit Transfer to other NRO accounts.
Repatriation	Current income is freely repatriable without limit Capital income funds can be repatriated up to USD 1 million per Financial Year The above repatriation is subject to necessary tax compliances and documentation
Taxation on NRO account	TDS will be deducted at 30% plus applicable surcharge and cess on interest earned by non-resident on NRO FD, RD and saving accounts If India has a Double Taxation Avoidance Agreement (DTAA) with the country where he/she is resident then a lower rate of TDS will be applicable as per the respective DTAA will be deducted subject to submission of required documents i.e. Tax Residency Certificate (TRC), Online filled copy of Form 10F and a declaration stating no Permanent Establishment (PE) in India. This is according to the provisions of the Income Tax Act, 1961 (IT Act) If your physical cash deposits/withdrawals in one or more accounts during the Financial Year amount to ₹2 million or more, it is mandatory to hold a PAN card.

*The term ‘Former’ or ‘Survivor’ basis refers to the condition, where only one of the two joint account holders, that is the Former account holder, can primarily operate the account. The ‘survivor’ can only operate the account after the ‘former’ passes away.

**The list mentioned is indicative and not exhaustive. These may differ from bank to bank. You may want to consult your bank for more details.

***Relative is defined under section 2 (77) of the Companies Act, 2013. This includes their parents (including stepparents), son (including stepson), son’s wife, daughter, daughter’s husband, siblings (including stepsiblings), and children.

Did you know?

Similar to converting your resident savings bank account to an NRO account, you are required to convert your residential Demat account to an NRO Demat account to continue investing in the Indian stock market.

How to open an NRO account?

You can open an NRO account when your residency status changes to a non-resident. You can either convert your existing resident savings account to an NRO account or open a new NRO account.

After moving abroad: You can download the NRO account application form from your bank’s website or nearest overseas branch. As an alternative, you can also visit your bank’s website and follow the instructions to open the account online and submit it to your local overseas branch or send it to designated bank branches/offices located in India.

Before moving abroad: Banks like ICICI Bank allow individuals with requisite documents to open an NRO account even before moving abroad. These include professionals transferred abroad, students with admission to a foreign university and seafarers. You will need to visit your bank’s nearest branch, fill up an NRO account opening form (or apply for conversion of your resident savings account to NRO account) and submit the requisite documents.

Find your nearest ICICI Bank branch here: Branch Locator.

Open an NRO Savings Account

The account opening process and timelines vary across banks. Please speak with your bank’s relationship manager to know more details.

Conclusion

If you are an NRI with any source of income in India, having an NRO account can be beneficial for managing your finances and investments in India. However, the income earned in the NRO account is taxable in India.

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Frequently Asked Questions

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Can an NRI maintain all three NRE, NRO, and FCNR (B) accounts simultaneously?

Yes, an NRI can maintain all three types of accounts simultaneously. He/she can use a combination of these accounts to manage his/her finances, depending on your income sources and financial needs.

What can a joint holder, a PoA holder and a mandate holder do in an NRO account?

Joint holder: As per Reserve Bank of India (RBI) regulations, a resident Indian can be a joint holder on a ‘former or survivor’ basis and can operate the account as a PoA holder during the lifetime of the NRI/ PIO account holder. To know more about what a joint holder can do, click here.

Mandate holder: A mandate holder can operate the NRI account locally. They can issue cheques for local payments, Open FDs, and execute other instructions except closing FDs, repatriating funds to a third party and gifting funds

To know more about what a mandate holder can do, click here.

PoA holder: As per (RBI regulations, the authority of PoA for account operations is restricted to making withdrawals for permissible local payments or sending money to the account holder through regular banking channels. So, they can issue cheques, remit funds, avail loans, manage insurance premiums and make investments on your behalf. A PoA holder can act only on the specific instructions detailed and defined in the PoA.

To know more about what a PoA holder can do, click here.

Can an NRO account have a PoA or mandate holder, who is not a joint holder, to operate the account?

Yes

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Disclaimer:

The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.