NRI Banking Services

A Guide to NRO (Non-Resident Ordinary) Accounts

autohr img By Pankaj Shaw | Last Updated : 01 Nov, 2025

NRO account
Table of Contents

An NRO (Non-Resident Ordinary) account is a type of bank account for NRIs to manage income earned in India. It can include rent, dividends, or a pension. You can deposit funds in both Indian and foreign currency. However, withdrawals are only allowed in Indian currency. Additionally, the funds cannot be freely repatriated into any foreign currency.

According to FEMA regulations, an individual must convert their existing resident account to an NRO account once they obtain NRI status. In this blog, we will guide you through everything you need to know about an NRO account.

Key Takeaways
  • An NRO account is a financial tool for NRIs to manage income earned in India, including rental income, dividends, and pensions.
  • Apart from an NRI, the NRO account can be opened by an OCI and a PIO as well.
  • Funds can be deposited in both Indian and foreign currencies, but withdrawals can be made only in INR.
  • Interest earned on an NRO account is subject to TDS at a rate of 30%. However, individuals can claim relief under the DTAA (if applicable).
  • The NRI account holder can repatriate interest earned the the principal amount up to 1 million USD per financial year, subject to tax compliance.

What is an NRO Account and Who Needs It?

NRO (Non-Resident Ordinary account) is a type of savings or current account held in India by an NRI to manage income earned in India. It includes rental income, dividends, or pensions.

It is a rupee-denominated account, and the deposits can be made in both foreign and Indian currency. However, withdrawals can only be made in Indian currency.

Interest earned on an NRO account is subject to taxation and TDS (Tax Deducted at Source) in India. However, you can claim relief under the DTAA tax treaty (Double Taxation Avoidance Agreement).

Who is Eligible to Apply for an NRO Account

The following individuals can open an NRO account:

  • NRIs (Non-Resident Indians): Indian citizens who are staying abroad for business, employment, or other reasons.
  • OCIs (Overseas Citizens of India): Foreign citizens of Indian origin with the OCI status.
  • PIOs (Persons of Indian Origin): Foreign nationals of Indian ancestry registered as PIOs.

What are the Key Features and Benefits of an NRO Account?

Here are some of the key features of an NRO account:

  • Taxation: Under Indian tax laws, interest earned on an NRO account is subject to TDS (Tax Deduction at Source). The interest is subject to a 30% tax and is deductible at source.
  • Joint Account: An NRI can open a joint NRO (Non-Resident Ordinary) account with another NRI or a resident Indian.
  • Nomination: The account offers nomination facilities to facilitate fund transfers to a nominee in the event of the account holder's demise.
  • Investments: An NRI can make investments in various financial investments with an NRO account. It includes fixed deposits, mutual funds, stocks, and real estate.
  • Repatriation: An individual is free to repatriate or transfer the interest earned on the deposited principal amount. You can also transfer the principal amount up to a certain limit. According to the rules, you can repatriate up to USD 1 million per financial year, provided you have paid the applicable taxes.

Benefits of an NRO Account

An NRO account offers the following benefits to the account holder:

  • Repatriation: The NRO account provides the flexibility to repatriate funds, subject to applicable guidelines.
  • Convenience: It provides easy access to funds through ATMs, online banking, and a cheque book.
  • Joint Account Holder: The account can have a resident Indian as a joint account holder.
  • Investment Options: NRIs can make investments in various Indian financial instruments and receive potential returns.
  • Easy Fund Management: An NRI can effectively manage their Indian income, pay bills, and make transactions in INR using an NRO account.

How to Open an NRO Account?

You can open an NRO account once you have an NRI status. You can either convert your resident savings account to an NRO account. If not, you can open a new NRO account by following the steps below:

  • Step 1: Select a Bank: Find a reputable bank in India that offers the best NRO account services.
  • Step 2: Gather the Documents: Collect all required documents in accordance with the bank's requirements. It can include a copy of the passport and visa, overseas address proof, passport-sized photographs, PAN, etc.
  • Step 3: Visit the Bank: Visit the bank's branch if possible. If not, apply online through the bank's website.
  • Step 4: Fill out the Application Form: Complete the NRO account application form and submit the required documents.
  • Step 5: Verification and Account Opening : Once you submit the form and documents, the bank will verify them and open the NRO account upon successful verification.

What are the Taxation Rules for NRO Accounts?

You must remember that only the interest earned on your funds in an NRI account is subject to taxation and not the entire balance. Under the Income Tax Act of 1961, tax on interest income is levied at a flat rate of 30%, along with applicable cess and surcharge.

It means that, suppose your account earns INR 100 as interest, nearly INR 30 (plus any cess/surcharge) will be deducted as tax. So, you will be left with INR 70 in net interest earnings.

The banks automatically apply TDS (Tax Deducted at Source) at this rate on NRO accounts. However, you may be eligible to claim a reduced TDS rate by claiming the DTAA (Double Taxation Avoidance Agreement) if your country has a DTAA agreement with India. It will help you ensure you are not paying more tax than required.

To avail these benefits, you are required to submit a few documents, such as:

  • TRC (Tax Residency Certificate) issued by your country of residence.
  • Self-declaration format to your CA (Chartered Accountant) to deduct the tax at source in India.

Difference Between NRO vs NRE Accounts

Consider the following table to know more about the features of an NRE vs an NRO account and choose one that suits your financial needs:

Parameter NRE Account NRO Account
Repatriation Freely repatriable for both principal and interest. Has a repatriation limit of up to 1 million USD each financial year (with documentation).
Fund Transfer Can transfer to another NRE or NRO account Can transfer to another NRO account only (not to NRE)
Tax Treatment

Tax-free (no income, wealth, or gift tax in India)

 Interest income is taxed in India (TDS applicable), subject to the respective income tax bracket.
Holding Joint Account Can hold a joint account only with another NRI With another NRI or a resident Indian
Risk of Fluctuation in the Exchange Rate Subject to losses during currency conversion No risk from currency fluctuation
Deposits and Withdrawals Deposits are allowed in foreign currency. Withdrawals can only be made in Indian currency. Deposits can be made in foreign and Indian currency, but withdrawals can be made only in Indian currency.

The Bottom Line

An NRO account is a valuable financial tool for NRIs to manage their income earned in India. You must understand the tax regulations for an NRO to ensure compliance. Although the interest earned in an NRO account is taxable in India, an NRI can claim reduced tax rates under the DTAA treaty. An NRI can transfer up to 1 million USD each financial year, provided they have paid all applicable Indian taxes.

Furthermore, if you have any more queries or need assistance with opening an NRO account, then you must connect with the experts at Savetaxs right away. The team at Savetaxs has been helping NRIs for over two decades in opening NRI accounts. Our team of experts brings more than 30 years of experience, ensuring you open your account with utmost confidence and precision.

Note: This guide is for informational purposes only. The views expressed in this guide are personal and do not constitute the views of Savetaxs. Savetaxs or the author will not be responsible for any direct or indirect loss incurred by the reader for taking any decision based on the information or the contents. It is advisable to consult either a CA, CS, CPA, or a professional tax expert from the Savetaxs team, as they are familiar with the current regulations and help you make accurate decisions and maintain accuracy throughout the whole process.

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Pankaj Shaw (Tax Expert)

Mr Shaw brings 8 years of experience in auditing and taxation. He has a deep understanding of disciplinary regulations and delivers comprehensive auditing services to businesses and individuals. From financial auditing to tax planning, risk assessment, and financial reporting. Mr Shaw's expertise is impeccable.

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Frequently Asked Questions

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No, an NRO (Non-Resident Ordinary) account is not tax-free. All income earned through an NRO account is taxable in India.

The primary disadvantage of an NRO account is that it has limited repatriation of funds (up to $1 million every financial year without any prior approval). The interest earned in an NRO account is subject to Indian taxes and TDS.

No, an NRO account is not mandatory for an NRI. However, it's mandatory to either open an NRO or NRE account or convert your existing resident savings account to an NRO account after your residential status changes.

Yes, your parents can transfer money from their Indian bank account to your NRO account. An NRO account is suitable for receiving income or funds in INR, including gifts from family.

The minimum balance requirement in an NRO account depends on the bank. It generally ranges from Rs. 5,000 to Rs. 10,000 for metro branches. If you maintain an NRE or FCNR account with an NRO account, then some banks also offer zero-balance NRO accounts.

TDS applies to the income that is credited to your NRO account. However, you can reduce or avoid it legally by:

  • Applying for a lower/Nil TDS certificate from the Income Tax Department using Form 13. 
  • Submitting DTAA documents to the bank. It can include Form 10F, TRC, and self-declaration. 
  • Claiming a refund when filing your Indian Income Tax Return in case excess TDS has been deducted. 

Yes, you can transfer money from your NRO to your NRE account, subject to certain conditions. The amount needs to be from legitimate Indian income with taxes duly paid.

Yes, you can deposit cash into your NRO account in Indian currency.  However, you cannot deposit foreign currency notes directly, and large deposits may need additional verification under KYC (Know Your Customer) and AML (Anti-Money Laundering) guidelines.