NRO Account: Meaning, Eligibility, Benefits and NRO Vs NRE

Are you an NRI with income sources in India, such as rent, dividends, or interest? Managing that income while living abroad can be tricky without the right banking setup. That is where an NRO account comes in: a special bank account designed specifically for Non-Resident Indians.

A Non-Resident Ordinary (NRO) account is a bank account for NRIs in India to deposit their Indian income, such as rent, dividends, and interest. The interest is fully repatriable. However, the principal amount is repatriable subject to certain NRO repatriation limits. Also, the interest income is taxable in India at the individual’s income tax slab rates. 

Here, we will explore what is an NRO account, its features, benefits, who can open it, required documents, and much more. 

What is an NRO Account?

If you are wondering about the full form of NRO or the meaning of the NRO account, then let’s understand this in detail. 

NRO means a Non-Resident Ordinary account. 

• It is an NRI account denominated in Indian rupee. Through this bank account, NRIs can manage the income they earn in India. An NRI can deposit the dividend, interest, rent, and other income that they earn in India in this account. 
• The NRO account minimum balance varies from bank to bank but typically ranges from ₹5,000 to ₹10,000 for metro branches.
• This account facilitates the money transfer outside India. One can deposit money in both Indian rupee and foreign currency. However, the withdrawals happen only in Indian rupees. 
• NRO accounts can be savings accounts, current accounts, fixed deposit accounts or recurring deposit accounts. 
• Also, the NRO account is not subject to any exchange rate fluctuations. 

Why Do You Need to Open an NRO Account?

As per FEMA guidelines, an NRI cannot have a savings account in India. After their residence status changes, the NRI has to convert their regular resident savings account to an NRO account. There could be a penalty for not converting to an NRO account. 

This account will help NRIs transfer their Indian income abroad. They can also transfer all their savings in India abroad through this account. This NRI bank account facilitates investments in India. This account best suits NRIs who have income-earning assets in India.

Features of an NRO Account

The following are the NRO account features:

• Two or more persons can jointly open the account. However, at least one individual has to be an NRI, PIO or OCI. The second holder can be an Indian. Furthermore, if both account holders reside abroad, then they can choose an Indian individual to have the ‘power of attorney’ to operate the account.
• The NRI account holders are free to transfer or repatriate the interest and principal amount. 
• As per NRO account rules, depositors can transfer a principal amount of up to USD 1 million in a financial year after paying the applicable taxes. 
• The interest on the NRO rupee account is taxable at 30% and is deductible at source.
• The account can be operated from anywhere in the world through internet banking facilities. Banks also offer international debit cards for this account. 
• NRIs can opt for loans against their NRO deposits.
• Through this account, NRIs can invest in term deposits, recurring deposits, mutual funds, etc. Also, the Government of India covers the term deposit up to ₹1 lakh.
• A nomination facility is available for NRO accounts.
• If the non-resident Indian holding the NRO account moves back to India and becomes a resident of India, the account has to be converted into a resident account. 
• Funds cannot be transferred from an NRO account to an NRE (Non-Resident External) account.

Who Can Open an NRO Account? 

The following are the eligibility criteria to open an NRO account:

• Non-resident Indians, Persons of Indian Origin, and Overseas Citizens of India can open the NRO account.
• Student studying abroad
• Seafarers
• Foreign Students studying in India
• Foreign Tourists on a short visit to India

Also, an Indian resident has to be appointed as a power of attorney for the Non-Resident Ordinary account.

Documents Required for NRO Account

Here’s the checklist to open an NRO account:

• Valid passport and visa
• Overseas address proof
• PAN card or Form 60
• Passport-size photographs
• Proof of NRI status (employment/student visa, work permit, etc.)

How to Open an NRO Account?

Here’s how to open an NRO account in a few steps:

1. Choose a bank offering NRI services.
2. Download and fill out the NRO account application form.
3. Attach the necessary documents. 
4. Submit the form via mail or by visiting a branch (some banks allow online submission).
5. Complete the KYC and verification process.

Benefits of an NRO Account

The following are the NRO account benefits:

• This NRI savings account helps account holders manage their NRO deposits, investments, and income earned in India.
• NRI can take back the funds to their country of residence (home country) through an NRO account. They can easily transfer USD 1 million a year. However, they have to pay Income Tax in India for gains.
• The account accepts deposits in Indian currency and also allows for inward remittances in foreign currency to be credited after conversion to INR. An individual may have some recurring income, such as rent or dividends, in India.
• With this account, NRIs can invest in India. For example, they can invest in mutual funds and Indian bonds.
• Depositors can get a loan against their NRO fixed deposits. The interest on the loan is usually lower than unsecured loans.
• One can jointly hold the account with an Indian resident to manage the finances back home seamlessly.

Difference between an NRO and a Resident Account

Following are the differences between an NRO account and a resident savings account:

Basis of Difference	NRO Savings Account	Resident Savings Account
Eligibility	Non-Resident Indians, Persons of Indian Origin, Overseas Citizen Of India	Indian Citizens, clubs, associations, etc.
Definition	NRO savings account is a rupee denominated account for NRIs to deposit their Indian income.	Savings account for Indian residents to deposit their income or savings.
Joint account	An NRI can open an NRO account jointly with an NRI or Indian citizen.	An Indian resident can open a joint account with another Indian resident.
Minimum deposit	The minimum deposit to open an NRO account in India is ₹5,000-10,000.	The minimum deposit to open a savings account in India is as low as ₹0 for some banks.
Taxation	The interest income is subject to tax as per the income tax slab rate. NRIs can reduce their tax liability by availing of DTAA benefits in a few countries.	The interest income is subject to tax as per the income tax slab rate.
Repatriation	The deposits made in this account are repatriable to the NRI’s country of residence with certain limits.	Deposits made in this account cannot be repatriated to accounts abroad.

Final Thoughts

The NRO account is an essential financial tool for NRIs to manage and repatriate their Indian income legally. Whether you earn rental income, dividends, or interest, having the right NRI account ensures smooth and compliant financial management.

By understanding the NRO meaning, its benefits, and how to open an NRO account, you will be better equipped to manage your Indian earnings effectively and legally.

Frequently Asked Questions