NRO (Non-Resident Ordinary) deposits are rupee-denominated accounts that allow NRIs/OCIs to hold and manage income accruing in India (such as rent, dividends, pension, interest), with repatriation of current income permitted and repatriation of principal subject to limits and documentation. These deposits can be opened as savings/current/term deposits, are subject to Indian taxation, and follow FEMA/RBI conditions for opening, operation, repatriation, and closure.
Who can open
- Eligible customers include NRIs, OCIs/PIOs, and certain foreign nationals visiting or residing in India (subject to FEMA and visa/residence documentation), as permitted by RBI; specific nationalities (Pakistan/Bangladesh) require prior RBI approval or additional conditions.
- Joint holding with resident relatives is permitted for NRO accounts; banks commonly allow “former or survivor” operations where a resident is a joint holder with an NRI.
Account types and tenor
- NRO can be opened as savings, current, and term (fixed/recurring) deposits; term deposit tenors generally range from 7 days to up to 10 years as per bank policy.
- The account is rupee-denominated; deposits and withdrawals occur in INR, although eligible inward remittances and repatriations can be executed through authorized dealer banks.
Permissible credits
- Credits typically include Indian-source income (rent, dividends, pension, interest), sale proceeds of assets held in India, inward remittances through banking channels, and transfers from NRE/FCNR(B) to NRO (subject to FEMA).
- Cash deposits and local transfers follow resident banking norms, but foreign currency cash is not credited; banks convert eligible foreign remittances into INR.
Permissible debits
- Debits include local payments, investments permitted to NRIs under FEMA, and transfers to other NRO accounts; outward remittances are permitted within applicable limits and documentation (notably Form 15CA/CB requirements for taxable sums).
- Transfers from NRO to NRE are generally not permitted except in limited cases (e.g., sale proceeds of assets within the USD 1 million facility) upon satisfying documentary requirements.
Repatriation rules
- Current income (interest, rent, dividend, pension, etc.) credited to NRO is freely repatriable net of applicable taxes, subject to documentary evidence and CA certification where required.
- Repatriation of NRO balances (including sale proceeds of assets) is permitted up to USD 1 million per financial year (April–March), subject to documentary proofs and tax compliance, routed through authorized dealers.
Taxation
- Interest on NRO deposits is taxable in India and subject to TDS; applicable rates may be reduced under DTAA upon furnishing PAN, Tax Residency Certificate (TRC), Form 10F, and bank-specific declarations.
- Banks deduct TDS at default rates if PAN/DTAA documents are not provided; customers should ensure timely DTAA registration to optimize after-tax yield.
Opening procedure
- Provide KYC: passport, valid visa/OCI/PIO card, overseas and Indian address proof (as applicable), PAN or Form 60 (especially for current accounts), and FATCA/CRS declarations per bank policy.
- Fund the account via Indian-source income, inward remittance, or transfer from NRE/other NRO; many banks support online/electronic account opening and NRO FD booking with stated minimums (often INR 25,000–50,000).
Interest and operation
- Interest rates on NRO term deposits are set by each bank within domestic deposit norms; operational features include nomination, auto-renewal, and overdraft against deposits as per policy.
- Interest is credited in INR and is taxable; banks publish rate schedules and operational terms for NRO deposits and FDs.
Loans against NRO deposits
- Banks may allow loans/overdrafts against NRO fixed deposits up to a specified percentage; end-use restrictions and standard security documentation apply.
- The deposit continues to earn interest while under lien unless liquidated to adjust the loan, following bank terms.
Premature withdrawal and penalties
- Premature withdrawal of NRO term deposits is permitted with bank-disclosed penalties; interest is paid for the completed period at the applicable rate less penalty per the bank’s policy.
- If operated jointly with a resident relative under “former or survivor”, banks generally require the former (NRI) to authorize closure unless otherwise documented (mandate/POA), per operational policy.
Closure at maturity
- On maturity, funds can be paid in INR to the linked NRO account or repatriated as current income (interest) or under the USD 1 million facility for principal, subject to documentation and taxes.
- For repatriation beyond current income, banks require CA certificates (Form 15CB) and taxpayer filings (Form 15CA) along with proof of source and tax compliance.
Closure on status change (return to India)
- NRO accounts may be re-designated to resident accounts upon change in residential status (permanent return/intention to stay for an uncertain period); balances continue as resident deposits thereafter.
- Alternatively, on eligibility, balances can be moved to RFC accounts for those becoming residents again after a non-resident period, as per FEMA provisions.
Special nationality restrictions
- Opening of accounts by individuals/entities of Pakistan nationality/ownership and entities of Bangladesh ownership requires prior RBI approval; individuals of Bangladesh nationality may open NRO accounts subject to valid visa and FRO/FRRO permits.
- Banks must ensure enhanced due diligence and prescribed approvals before onboarding such customers under FEMA and AML guidelines.
Practical checklist for NRIs/OCIs
- Confirm purpose: Indian-source income management vs investment; choose savings/current for flows and term deposits for yield.
- Prepare documents: passport, visa/OCI, PAN/TRC/10F for DTAA, overseas address, and source-of-funds proofs; pre-verify bank minimums and online process.
- Plan repatriation: use current income route for interest/rent; for principal or asset proceeds, plan under the USD 1 million facility with CA certification and tax filings.
FAQs
- Can interest be freely repatriated? Yes, current income from NRO is freely repatriable net of taxes with documents.
- Is principal fully repatriable? Subject to the USD 1 million per financial year limit with documentation and tax compliance.
- Are NRO deposits tax-free? No, interest is taxable and subject to TDS; DTAA relief is available on furnishing required documents.
- Can NRO be joint with a resident? Yes, typically permitted with resident relatives, often as “former or survivor.
Note: Always refer to the latest RBI FAQs/masters and the specific bank’s NRO deposit policy and tariff for currency of rules, repatriation processing, and documentation updates.
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