10/08/2015
ALL ABOUT – “NON RESIDENT (ORDINARY) RUPEE ACCOUNT – NRO ACCOUNT”
WHO CAN OPEN NRO ACCOUNT?
• Any person resident outside India, denominated in Indian Rupees.
• It may be opened / maintained in the form of current, savings, recurring or fixed deposit accounts.
• It may be held jointly with residents and / or with non-residents.
WHAT ARE THE PERMISSIBLE CREDITS AND DEBITS IN NRO ACCOUNT?
A. Credits
(i) Remittances from outside India through normal banking channels.
(ii) Any foreign currency by the account holder during his temporary visit to India. Foreign currency exceeding USD 5000 or its equivalent should be supported by currency declaration form.
(iii) Transfers from rupee accounts of non-resident banks.
(iv) Legitimate dues in India of the account holder such as rent, dividend, pension, interest, etc.
(v) Sale proceeds of assets including immovable property.
(vi) Resident individual may make a rupee gift to a NRI/PIO who is a close relative of the resident individual by way of crossed cheque /electronic transfer.
(vii) Resident individual may lend to a Non-resident Indian (NRI)/ Person of Indian Origin (PIO) close relative by way of crossed cheque /electronic transfer, subject to conditions within the overall limit.
B. Debits
(i) All local payments in rupees subject to compliance with RBI guidelines.
(ii) Remittance outside India of current income like rent, dividend, pension, interest, etc..
(iii) Remittance up to USD one million, per financial year, by NRI, subject to payment of tax.
(iv) Transfer to NRE account of NRI within the overall ceiling of USD one million per financial year.
WHAT IS THE PERMISSIBLE REMITTANCE OF ASSETS BY A CITIZEN OF A FOREIGN STATE?
A citizen of a foreign state, not being a citizen of Nepal or Bhutan or PIO, who –
(i) has retired from an employment in India, or
(ii) has inherited assets, or
(iii) is a widow resident outside India and has inherited assets of her deceased husband of an Indian citizen resident in India,
may remit an amount, not exceeding USD one million per financial year out of the balances in the account, on production of documentary evidencer, subject to payment of taxes.
WHETHER NRO ACCOUNT CAN BE OPENED BY A FOREIGN NATIONAL OF NON INDIAN ORIGIN ON A VISIT TO INDIA?
NRO (current/savings) account can be opened by a foreign national of non-Indian origin visiting India, with funds remitted from outside India through banking channel or by sale of foreign exchange brought by him to India. The balance in the NRO account may be converted by the Authorised Dealer bank into foreign currency for payment to the account holder at the time of his departure from India provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon.
WHETHER LOAN / OVERDRAFT FACILITY CAN BE OBTAINED AGAINST THE SAID ACCOUNT?
Loans to non-resident account holders and to third parties may be granted in Rupees by Authorized Dealer / bank against the security of fixed deposits subject to the conditions that it shall be utilised only for meeting borrower's personal requirements and/or business purpose and not for carrying on agricultural/plantation activities or real estate business or for re-lending.
WHAT WILL BE THE STATUS OF NRO ACCOUNT ON CHANGE OF RESIDENTIAL STATUS OF ACCOUNT HOLDER?
(a) From Resident to Non-resident
(i) When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period - Existing account should be designated as a NRO Account.
(ii) Foreign nationals who come to India on employment and become residents and are eligible to open/hold a resident savings bank account are permitted to re-designate their resident account maintained in India as NRO account on leaving the country after their employment to enable them to receive their legitimate dues subject to certain conditions.
(b) From Non- resident to Resident
NRO accounts may be re-designated as resident Rupee accounts on return of the account holder to India for taking up employment, or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period. Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit.
WHETHER NRO ACCOUNT CAN BE OPERATED BY A POWER OF ATTORNEY HOLDER?
It is allowed provided operations are restrictions to all local payments in Rupees including payments for eligible investments and remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes.
The resident Power of Attorney holder is not permitted to repatriate outside India funds held in the account other than to the non-resident individual account holder himself nor to make payment by way of gift to a resident on behalf of the non- resident account holder or transfer funds from the account to another NRO account.
WHAT IS THE APPLICABLE INCOME TAX ON NRO?
Interest income is subject to deduction of tax at source @ 30.90%. In case, depositor is resident of any of those countries with whom India has a DTAA, the tax will be deducted as per DTAA (Double Taxation Avoidance Agreement) agreed between India and the respective country.
