Non-Resident Ordinary (NRO) account is a type of bank account in India meant for non-residents (NRIs or Non-Resident Indians) to manage their income earned in India such as rent, dividends, pension, etc., and facilitate transactions in Indian currency (INR). NRO accounts can be opened by NRIs, Persons of Indian Origin (PIOs), and foreign nationals of Indian origin.
Key features of NRE accounts include:
Any person resident outside India (other than a person resident in Nepal and Bhutan) (Individuals/ entities of Pakistan nationality/ origin and entities of Bangladesh origin require the prior approval of the Reserve Bank of India).
Proceeds of remittances received in any permitted currency from abroad or any permitted currency tendered by the account holder during his temporary visit to India or transfers from rupee accounts of Non-Resident Banks.
Legitimate dues in rupees of account holder in India.
Transfer from NRE/FCNR accounts.
Designating existing account as NRO, of a person proceeding abroad (other than Nepal or Bhutan) which would give him the status of a NRI.
SB, CD, Term Deposit
Term Deposit - 7 days to 120 months (Minimum deposit amount for 7 days to 14 days is Rs one lakh)
SB & TD–As applicable to domestic deposits.
Allowed with resident.
Not repatriable except for the following in the account – 1) Current income. 2) Up to USD 1 million per financial year for any bonafide purpose out of the balances in NRO account/sale proceeds of assets in India acquired by way of inheritance/ legacy inclusive of assets acquired out of settlement subject to certain conditions.
Nominee can be a person resident in India or a person resident outside India. In the case of Non-resident nominee, the amount entitled to him from the account(s)/deposit(s) of a deceased person will be credited to his NRO account and the repatriation will be subject to the overall ceiling of USD 1 million per financial year, subject to taxes.
Tax at the rate of 30 % on the interest income is to be deducted at source and remitted to Government. If the Non-Resident is from any of the countries with whom Double Taxation Avoidance Agreement is entered, the applicable rate will be deducted.
1% penalty on withdrawal of term deposits above Rs 15000.00 with effect from 08.01.2015 on fresh deposits and after the above cut-off date.
In case of an overdue deposit renewed with overdue interest, is closed prematurely before completing the minimum period for which such deposits are accepted from the date of renewal, no interest is payable on the renewed deposit and the interest paid for the overdue period should also be recovered.
Can be done as per Rules as applicable to domestic deposits.
NRO accounts should be redesignated as resident accounts on the return of account holder to India, provided the branch is satisfied that the account holder has returned to India for taking up employment, business, or vocation or for any other purpose indicating his intention to stay in India for an uncertain period. Where the account holder is on a temporary visit to India, the account should continue to be treated as Non-resident even during such visits.
Branches may allow transactions in NRO accounts complying with instructions contained in FEMA Notification No. FEMA 5/2000-RB dated 3rd May 2000.
At the time of opening of the accounts, the account holders should give an undertaking that in cases of debits to the accounts for the purpose of investment in India and credits representing sale proceeds of investments, they would ensure that such investments/ disinvestments would be covered by the general or special permission of Reserve Bank of India.
Credits: Proceeds of remittances in any permitted currency from outside India through normal banking channels or any permitted currency tendered by the account holder during his temporary visit to India or transfers from rupee accounts of non-resident banks. Other legitimate dues in India of the account holder.
Debits: All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank and remittance outside India of current income in India of the account holder net of applicable tax.
A resident can be authorised by the NRI by way of Power of Attorney or Mandate Letter to operate the NRO accounts. The withdrawals are restricted to local payments only by the mandate holder. Operations on the account in terms of Power of Attorney is restricted to withdrawals for permissible local payments or remittance to the account holder himself through normal banking channels.
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