What are Non-Resident Ordinary Accounts
5 min read | 4 months ago
If you're an NRI, you must already be aware that you cannot use a regular domestic bank account in India. So, what can you do to manage the income you earn in India? NRO accounts are the solution for you. These accounts will help you manage your income and investments in India conveniently. Let us take a look at the concept behind NRO accounts below along with the key NRI account benefits that you can expect.
What Is an NRO Account?
An NRO account is a savings or current account opened by NRIs with an Indian bank. It is used to manage their income earned in India, including rent, dividends, and pension. The account can be held only in Indian currency, and the funds in the account are repatriable only up to USD 1 million per Financial year after paying applicable Taxes. The Reserve Bank of India (RBI) regulates NRO accounts, and NRIs can also hold joint accounts with resident Indians.
Do You Just Need an NRO Account?
As an NRI, you might wonder whether you need both NRE and NRO accounts. The answer is yes. But why do you need them? Here's an explanation in this regard.
NRO accounts can permit almost all types of transactions in the account, such as deposits and withdrawals from the account and funds transfer.
Having both NRE and NRO accounts is beneficial for NRIs as it allows you to manage your income and investments in India separately and avoid tax implications on transactions that are not allowed in NRE accounts. So, in short, each of the two accounts fulfils specific needs that you may have.
Who Can Open an NRO Account?
Only NRIs, Persons of Indian Origin and Overseas Citizens of India are eligible to open NRO accounts. In contrast, PIOs and OCIs can open them only if they do not have an NRE account. For opening NRO account customer needs to submit proof of NRI status, such as a passport or visa. Furthermore, applicants must submit their Permanent Account Number if they have one or a Form 60/61 if they do not. As an NRI opening an NRO account, you must also provide proof of your address, including a utility bill, bank statement, or rental agreement, to name a few.
How to Open an NRO Account?
To open an NRO account, NRIs can visit a bank branch or open an account online. The process of opening an NRO account involves the following steps:
Step 1: Choose a bank: Select a bank that offers NRO accounts and meets your requirements.
Step 2: Gather necessary documents: Gather all the necessary documents required to open an NRO account, including proof of NRI status, PAN, and address proof.
Step 3: Fill in the application form: Fill in the application form with all the necessary details, including personal and contact information.
Step 4: Submit the application form: Submit the application form along with the necessary documents to the bank.
Step 5: Activate the account: Once the bank verifies the documents, the account is activated, and the account holder can start using it.
Online mode of opening an NRO account is convenient and saves time. Account holders can access their accounts online, check their balance, and perform transactions from anywhere in the world.
Benefits of Having an NRO Account for NRIs
Here is a closer look at these NRI account benefits:
- Tax implications of opening an NRO account: The interest earned on funds in the NRO account is taxable in India.
- Remittance of funds to and from India: NRO accounts allow NRIs to remit funds to and from India conveniently. The account holder can transfer funds to another NRO account, or foreign account. However, the account holder cannot transfer funds from an NRO account to an NRE account.
- Investment options available for NRO account holders: NRO account holders can invest in various financial instruments, including mutual funds, stocks, and bonds. However, they must comply with Foreign Exchange Management Act (FEMA) regulations.
- Income Tax Return Documents of the previous years
Conclusion
In conclusion, NRO accounts are an essential financial tool for NRIs who want to manage their income earned in India. They allow NRIs to manage their income in India conveniently and offer several benefits. NRIs can open NRO accounts easily by following the necessary steps and providing the required documents. If you are an NRI, it is crucial to open an NRO account to manage your income and investments in India.
FAQs
1. What is a non-resident ordinary account?
A non-resident ordinary account is a bank account that allows non-resident Indians to deposit and manage their funds in Indian currency.
2. Who is eligible to open a non-resident ordinary account?
Any non-resident Indian, person of Indian origin, or foreign national of Indian origin can open a non-resident ordinary account.
3. What are the benefits of having a non-resident ordinary account?
A non-resident ordinary account offers several benefits, including Interest earnings, Investment options, etc.
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