As Interest Rates in India are higher as compared to the western countries, many NRI’s have a preference for investing in India. To make use of these high differences in Interest Rates in India and other developed countries, NRI’s prefer to invest in India by opening a NRI Bank account in India.

An NRI can keep money in the following 3 types of Bank Accounts i.e.

  1. FCNR Account
  2. NRE Account
  3. NRO Account

We’ve already discussed FCNR Account and NRE Account in our previous articles and in this article; we’ll be highlighting the key features of NRO Account.

Recommended Read:-

  1. Benefits of opening FCNR Account
  2. When should you open a NRE Account

What is NRO Account?

NRO Account stands for Non Resident Ordinary Account which can be opened either by Non-Resident Indians (NRI’s) or by Persons of Indian Origin (PIO’s) settled abroad (except for those settled in Nepal and Bhutan).This type of a NRI Account may be opened either in the form of Savings Account/ Current Account/Recurring Deposit/ Term Deposits.

Unlike FCNR Account which is operated in Foreign Currency, NRO Account can only be operated in the Indian currency i.e. Rupees. As this account can only be operated in Indian Rupees, it is best suited for NRI’s who have income in India (such as Rent Income, Dividend Income and Pension etc)

Most Banks also issue Debit and ATM Cards for the NRO Accounts which can be used for cash withdrawals and merchant locations in India.

Documents required for opening NRO Account

The following documents are required for opening an NRO Account by NRI in India

  1. Photocopy of the relevant pages of your current passport where your name, address, date of birth, date & place of issue, expiry date, photograph & signature appear
  2. Photocopy of Valid work permit/ employment visa (in case of expired visas, duly acknowledged petitions made to the Visa Authorities for renewal of visas will be accepted as a valid document.)
  3. Address proofs required

Funds with which an NRO Account can be opened

  1. These accounts can be opened with funds received as foreign inward remittances in convertible currency through the normal banking channels. The foreign currency travellers cheque/ notes may be accepted during temporary visits of the NRI, for credit to the Account
  2. The accounts can also be opened with the Legitimate Local Dues denominated in Indian Rupees viz. Rent, Dividend, Pension, Interest and Sale Proceeds of Assets etc.

NRO Account Interest Rates

The Interest Payable on NRO Account varies across different Banks in India and an NRI is advised to check these Interest Rates on the Website of the Banks.

Unlike FCNR Account and NRE Account which are exempt from Taxes on Interest Income earned in India, the Interest on NRO Account in India is taxable as per the prevailing rates and TDS is also deductible on the same.

Repatriation of Funds outside India

NRIs may remit up to $1 Million per calendar year, out of balances held in this type of a NRI Account which could be acquired from the sale proceeds of assets acquired in India out of rupee or foreign currency funds or by way of inheritance from a resident Indian, provided:

(a) Assets acquired in India out of rupee/foreign currency funds
(i) Immovable property: NRIs and PIO may remit sale proceeds of immovable property purchased by them when they were resident or out of Rupee funds as NRI or PIO.
(ii) Other financial assets: There is no lock-in period for remittance of sale proceeds of other financial assets from NRO Account

(b) Assets acquired by way of inheritance:

Sale proceeds of assets acquired through inheritance can be remitted. No lock-in period applies here if the authorised dealer is satisfied that the proceeds are from inherited property.

Some NRI’s are of the opinion that all NRI Accounts are tax-free, but that is not the case. The following video explains in detail, when to use which type of bank account:-