For many Non-Resident Indians (NRIs), managing their personal finances from India and their resident country can be a challenge. It can be overwhelming to keep a track income from sources such as rent, dividends, pensions, or interest. However, managing these earnings from abroad is not always simple. Currency restrictions and tax rules can make financial planning more complicated. An NRO (Non-Resident Ordinary) Account provides a practical way to handle these funds while following Indian financial regulations.
What is an NRO Account?
An NRO Account is a bank account that helps NRIs manage income earned in India. It accepts deposits in both Indian and foreign currencies, though withdrawals can only be made in Indian rupees. This setup makes it easier to cover local expenses, such as property upkeep, family support, and loan repayments, without worrying about exchange rate fluctuations.
Key Benefits of an NRO Savings Account
- Easy Management of Indian Income
Many NRIs receive income from multiple sources in India. An NRO savings account gathers these funds in one place, making it easier to manage. Whether it’s rental income, returns from fixed deposits, or any other earnings, everything is credited to the account, allowing for better tracking and use.
- Repatriation of Funds
Although an NRO Account is meant for handling Indian income, some of the balance can be sent abroad. As per the RBI guidelines NRIs can transfer up to USD 1 million from their NRO accounts per financial year. This feature ensures access to funds both in India and overseas when needed.
- Interest Earnings on Deposits
Banks offer competitive interest rates on NRO savings accounts, allowing NRIs to grow their Indian income while keeping funds accessible. However, the interest earned is taxable in India, so it’s important to factor that into financial planning.
- Tax Compliance and Deductions
Income in an NRO Account is subject to Indian taxation. The interest earned on a NRO savings account is subjected to Tax Deducted at Source (TDS) by the banks. However, NRIs may be able to reduce their tax burden by taking advantage of tax treaties between India and their country of residence. Submitting the necessary documents can help lower tax liabilities under the Double Taxation Avoidance Agreement (DTAA).
- Convenient Fund Access and Bill Payments
An NRO Account makes it simple to manage regular expenses in India. From utility bills and insurance premiums to local taxes, payments can be made directly from the account. Additionally, debit card access ensures that funds are available whenever required.
Who Should Open an NRO Account?
NRIs with financial interests in India will find an NRO Account particularly useful. Those earning rental income, pension payments, or dividends can benefit from having a dedicated account for managing these funds. With an organised approach to handling Indian earnings, it becomes easier to maintain financial stability.
Steps to Open an NRO Account
Opening an NRO Account is a simple process. Most banks require the following documents:
- Proof of NRI status (copy of passport, visa, or work permit)
- Address proof (Indian and overseas address)
- PAN card
- Recent photographs
Once the documents are submitted, the bank verifies them before activating the account. Some banks even offer online KYC application process, making it more convenient for NRIs to open an account remotely.
Difference Between NRO and NRE Accounts
NRIs often need to choose between an NRO and an NRE (Non-Resident External) Account. While both accounts help NRIs manage their finances in India, they serve different purposes.
- Purpose: An NRO Account is best for handling income earned in India, such as rent, pension, or dividends. An NRE Account, however, is meant for depositing foreign earnings in India.
- Taxation: Funds in an NRO Account are subject to Indian taxes, including Tax Deducted at Source (TDS) on interest earned. In contrast, an NRE Account is tax-free in India.
- Repatriation: NRE Accounts allow full repatriation of both principal and interest without restrictions. NRO Accounts have repatriation limits, permitting transfers of up to USD 1 million per financial year with tax clearance.
- Joint Holding: An NRO Account can be held jointly with another NRI or a resident Indian. On the other hand, an NRE Account can only be jointly held with another NRI.
Conclusion
An NRO Account helps NRIs manage their Indian income efficiently while ensuring compliance with regulations. With interest earnings, payment options, and repatriation facilities, it provides a structured way to handle finances. Choosing the right account based on personal financial needs ensures that income earned in India is managed effectively.
