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 a NRO Account

Proof to be submittedAccepted Documents
Proof of StatusAnyone of the followingFor NRI’s
1. Valid VISA/ Work Permit

1. PIO Card/ OCI Card
2. Relevant Pages of Passport of Parents or Grand Parents, establishing their Indian Origin
3. Marriage Certificate establishing spouse’s Indian Origin

Proof of IdentityRelevant Pages of Passport
Proof of Tax ResidencyAny one of the following

  1. Document mentioning the Tax Identification No
  2. Certificate of Residence or any valid identification issued by an authorised Govt body
  3. Any financial statement
Current Address Document
(Overseas only)
Any one of the following

  1. Relevant Pages of Passport (mentioning overseas address)
  2. Self Declaration of Address by submitting any one of the following:-
    1. Govt issued National Identity Card at the Country of Residence
    2. Driving License Issued abroad
    3. Utility Bill (Electricity/ Telephone/ Gas etc)
    4. Original Copy of Latest Overseas Bank Statement or existing NRE/ NRO Account statement mentioning overseas address
    5. Employer’s Certificate
Proof of Permanent Address
(Overseas/ Indian)
Anyone of the following

  1. Relevant Pages of the Passport
  2. Driving License
  3. Voter Identity Card
  4. Aadhaar Card
Additional Proof for NRI’s who are not visiting the branchAnyone of the following:-

  1. Cheque drawn on overseas bank account
  2. Cancelled/ Paid Cheque of the Overseas Bank Account
  3. Proof of Income/ Pay Slip/ Tax Return

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.

Tax on NRO Accounts

NRO Accounts are used to receive funds which are earned from Indian sources. And as this income has been earned from Indian sources, therefore, the funds received in NRO Accounts are also liable to tax in India.

Irrespective of which country the NRI is residing in (even if he is in tax free countries like UAE), the money earned by the NRI from Indian sources is liable to tax in India.

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.

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:-