NRO account for NRIs: Which funds can be deposited, tax on interest and repatriation rules

You may no longer have a regular savings account in India after you announce your Non-Resident Indian (NRI) status. Rather, you have to register an NRI account or convert your existing one.

For such NRIs, a Non-Resident Ordinary (NRO) account is a popular way to manage their deposits or income earned in India, such as dividends, pensions, rent, etc. This account allows you to receive funds in either Indian or a foreign currency.

As per the HDFC Bank website, “However, only Indian currency can be withdrawn as NRO accounts are kept in Indian currency and cannot be freely repatriated into any foreign currency.”

Which funds can be deposited into an NRO account?

The following funds can be deposited into an NRO account:

Transfers from another Resident Indian, Non-Resident External NRE, NRO or Foreign Currency Non-Resident (Bank)- FCNR (B)- account.

Fresh remittances from abroad through banking channels.

Personal cheques drawn on a foreign account.

Proceeds from foreign currency notes or travellers cheques tendered by an NRI, Person of Indian Origin (PIO) or Overseas Citizen of India (OCI) while visiting India. Amounts above USD 5,000, or its equivalent in currency, or USD 10,000, or its equivalent in travellers cheques, should be accompanied by a currency declaration form.

Interest, dividend and maturity proceeds from investments made in India on a non-repatriable basis.

Also read: Rs 1.09 crore remittance sent to home by an Indian working in Kuwait, but he didn't file ITR, received income tax notice; gets relief in ITAT Ahmedabad

NRE vs NRO account: What is the difference?

There are key differences between an NRE and an NRO account when it comes to taxation, repatriation and the type of income that can be credited, as per the SBI website.

Interest earned on an NRO account is subject to income tax deduction at source in India. Interest income earned on an NRE account is tax-free in India.

The balance held in an NRE account can be fully repatriated abroad. Funds in an NRO account are partially repatriable, up to USD 1 million per financial year, subject to the payment of taxes in some cases.

Overseas earnings can be deposited into an NRE account. An NRO account can receive earnings from both overseas and Indian sources.

Particulars	NRE account	NRO account
Interest taxation in India	Interest income is tax-free in India	Interest income attracts income tax deduction at source in India
Repatriation	Balance can be fully repatriated abroad	Funds are partially repatriable, up to USD 1 million per financial year, subject to payment of taxes in some cases
Source of earnings	Overseas earnings can be deposited	Earnings from overseas as well as Indian sources can be deposited