Why the NRIs need NRO accounts?

The account held by the resident Indian will be re-designated as an NRO account, once he/she becomes a Non-Resident Indian (NRI). A new NRO account can be opened in the bank from abroad if they need one. NRO account is maintained in Indian Currency. The  NRO account holder can use these funds available in his NRO account for local payments/expenses without any upper limit. The repatriation of local receipts can also be done by a simple procedure.

An NRI (Non-Resident Indian)/PIO (person of Indian origin)/OCI (Overseas Citizen of India) is permitted to rent out their properties in India and he/she is eligible to repatriate local receipts like rent, dividends, the settlement from the past employer towards, P.F; gratuity sale proceeds of assets, received in India. NRO accounts are opened in India, with a view to credit such legitimate local income to the beneficiary’s account. NRO accounts may be opened /maintained in the form of current, savings, recurring, or fixed deposit accounts. The remittance from abroad may also be deposited in the NRO account.

Repatriation of  funds from the NRO account:

As per present RBI guidelines, a non-resident Indian (NRI) or a person of Indian Origin (PIO) may remit an amount up to USD one million per financial year, out of balances held in his NRO rupee account for all bonafide purposes, subject to pay applicable taxes in India, if any. Further, any repatriation from the NRO account is subject to payment of applicable taxes in India. The remittance is allowed subject to the satisfaction of the authorised Dealer and there is no need to obtain prior approval from the Reserve Bank of India for such remittance. However, other than current income, NRI/PIO cannot remit over the limit of USD 1 Million per financial year without the prior approval of RBI.

[In the event of NRIs/PIO who do not maintain an NRO account in India, the current income like rent, dividend, pension, interest, etc. can be remitted directly to the account of NRI/PIO abroad. However crediting such an amount to an NRE account or remitting abroad is permitted only based on an appropriate certification of a Chartered Accountant, that the amount proposed to be remitted is eligible for remittance, and that applicable taxes have been paid or provided for. There is no need to obtain prior approval from the Reserve Bank of India for such remittance.]

Transfer of amount from NRO to NRE A/C.

With effect from 07.05.2012, RBI has permitted for direct credit/ transfer of balance, in NRO account to NRE account up to US $ one million per year to NRIs/PIOs similar to the facility of remittance abroad. This is subject to the production of documentary proof like the Copy of the Passport, a TDS certificate for tax deducted on the NRO account which the bank has to provide, a Copy of the PAN card if available, and a certificate by a Chartered Accountant in the formats prescribed by Reserve Bank of India.

 NRO accounts can be opened under joint names.

 NRO accounts may be held by non-residents jointly with residents.     

NRO accounts of foreign tourists:

Foreign tourists visiting India can also open an NRO account; provided the account is maintained for a maximum period of six months and no other credit except money in foreign exchange brought by them only can be credited to their account. The money held in the NRO account of foreigners can be repatriated.

Tax liability on interest earned on NRO A/cs.

When an Indian national or person of Indian Origin, resident in India, leaves India for a country (other than Nepal and Bhutan) for taking up employment, business, or vocation outside India or for any other purpose indicating his intention to stay outside India permanently or for an uncertain period is called NRI. The profit made by an NRI from any source within India is liable for tax payment. The Interest earned on an NRO account, irrespective of the amount, is also liable for tax at the rate of 30% (tax deductible at source). Under India’s double tax treaties with several countries, the NRIs/ PIOs can take benefit from the lower rate of  TDS @12.5%;10%, or 15%.But they are required to provide a Tax Residency certificate by the Government of the NRI’s / PIO’s country of residence i.e. UAE; Middle East; USA, UK, Kenya, or Belgium Government as applicable. The TDS is reduced to 12.5% for tax residents of UAE under IIndia-UAE Double Tax Treaty based on self-declaration; for residents of Oman, Kuwait, and Qatar @10% and for tax residents of USA, UK, Kenya, and Belgium @ 15% as the case may be.

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