NRO account: managing Indian income as an NRI

Many NRIs still earn money inside India, from rent, dividends or a pension. The NRO account is built to manage that Indian income. This guide explains what an NRO account is and how it differs from other NRI accounts.

Quick answer

An NRO account, short for Non-Resident Ordinary account, lets an NRI manage income earned in India, such as rent, dividends or a pension, held in rupees. Unlike an NRE account, repatriation from an NRO account is allowed only up to a yearly limit and after tax. It is regulated under RBI rules.

Key takeaways

• An NRO account manages an NRI's income earned in India.
• It holds rupees from sources like rent, dividends or pension.
• Repatriation is allowed only up to a yearly limit.
• Interest is generally taxable in India.
• It is regulated under RBI rules.

What is an NRO account?

NRO stands for Non-Resident Ordinary account. It is a bank account that an NRI uses to manage money earned within India. This includes income like rent from property, dividends from shares, or a pension.

The account is held in rupees. When an Indian resident becomes an NRI, their existing rupee accounts are often converted into NRO accounts to keep handling their Indian income.

How does an NRO account work?

An NRO account collects rupee income that arises in India. Rent, dividends, interest and other Indian earnings can be deposited into it. The NRI can use this money for expenses in India, such as paying bills or supporting family.

You can also transfer money from abroad into an NRO account, but once money is in it, the rules on taking it back abroad are stricter than for an NRE account.

What are the repatriation limits?

This is the key difference from an NRE account. Money in an NRO account is repatriable only up to a set yearly limit, and usually after paying applicable taxes and completing the required paperwork. It is not freely repatriable.

So an NRO account is meant more for managing Indian income and spending within India, rather than for freely moving large sums abroad. For freely repatriable foreign earnings, an NRE account is used instead.

How is NRO income taxed?

Interest earned on an NRO account is generally taxable in India, and tax may be deducted at source. This is different from an NRE account, where interest is generally exempt. Tax rules can change and depend on individual circumstances.

Because tax applies, and repatriation needs paperwork, NRIs often use an NRO account specifically for their Indian-sourced income. It is wise to check the current tax position and consult a professional before relying on any tax treatment.

How is NRO different from NRE and FCNR?

The three NRI accounts differ by the source of money, the currency and the freedom to repatriate. An NRO account holds Indian income in rupees with limited repatriation. An NRE account holds foreign earnings in rupees and is freely repatriable. An FCNR account holds foreign earnings in foreign currency.

So the NRO account is the one for Indian-sourced income like rent and dividends. Choosing the right account depends on where the money comes from and what the NRI wants to do with it.

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