An NRO (Non resident ordinary) account is a savings or current account held by NRIs in India to manage their income earned in India. A non-resident Indian having a stipulated source of income domestically from any source is required to open an NRO account to deposit the same.
The account holder can deposit and manage accumulated rupee funds conveniently through this account.
An NRO account can also be opened by a Person of Indian Origin (PIO) and an Overseas citizen of India (OCI).
FEATURES OF NRO ACCOUNT
The main features of NRO account are –
- The interest earned on an NRO Account is taxable at 30%, deductible at source & the income earned in India, deposited in an NRO Account can include rent, dividend, pension, etc.
- An NRO account can be opened with another NRI or a resident Indian (a close relative) as mentioned under Section 6 of the Companies Act 1956.
- Interest rates on these accounts are the same as domestic rates.
- NRO accounts have limited access for repatriation. The interest amount can be repatriated freely, but the principal amount can be repatriated only within set limits.
BENEFITS OF NRO ACCOUNT
An NRO account provides the following benefits to the account holders-
- An NRI can opt for loans against NRO fixed deposit to meet any emergency expenses arising either in India or in the respective country of residence.
- These accounts can be easily used by NRIs to invest in term deposits which have safe and assured returns which include both fixed and recurring deposit investments.
- The fixed deposit accounts are covered up to a sum of Rs.1 lakh by the government of India in case the financial institution fails or defaults, thereby ensuring high returns through investment in NRO accounts.
- The NRO accounts are not exposed to any kind of exchange rate risks.
DRAWBACKS OF NRO ACCOUNT
- An NRO account cannot be used to hold foreign exchange. Since they are used to deposit the earnings inside India, these accounts can only hold INR.
- These accounts are subject to tax liabilities. The principal earned as well as the interest, both are subject to tax deductions at a flat rate of 30%.
- Funds can be transferred from an NRO to another NRO account, but cannot be transferred from an NRO account to an NRE account.
Thus , in simple words A Non-Resident Ordinary (NRO) Account is a popular way for many Non-Resident Indians (NRIs) to manage their deposits or income earned in India & also help to maintain a regular flow of income earned in the form of rent, pensions, or dividends from India.