Many non-resident Indians who have an income source in India operate an NRO account. If you are looking to open a new NRO account, read on to know more about the ten important facts about this account.
India has one of the largest diaspora populations globally; nearly 16 million Indians reside outside the country. Most Indians travel overseas for better job and business opportunities. So, if you have recently moved abroad, you may still want to remit your earnings to your family in India. As per the RBI mandate, you can remit foreign earnings to your regular Indian savings account; you need to open and operate an NRI account.
In India, most banks offer two types of NRI accounts – NRO account (Non-resident Ordinary) and NRE account. NRE full form is the Non-Resident External account. While the NRO is ideal for people who have an income source in India, the latter is best suited if you want to remit your salary to India.
Let us look at some of the important things you must know about the NRO account.
- If you have an existing Indian resident account, you can convert the same to NRO account after attaining the NRI status. The other alternative is to open a new NRO account and close the Indian resident account. The closure of the resident Indian citizen savings account is vital because, as per the RBI mandate, NRIs cannot operate a regular account meant for Indian; non-closure can attract a hefty penalty.
- When you open an NRO account, you must comply with the bank’s documentation process. Typically, the banks require the NRIs to submit proof of NRI status, a copy of valid visa and passport, etc.
- If you are converting your existing Indian resident account to an NRO account, you must fill a relevant form. If you are opening a joint account with your relative, the form must be duly signed by all account holders.
- You can open an NRO account either as a savings account, current account, fixed deposit, or recurring deposit to suit your needs. If you are looking for a secured investment option that provides decent returns, you can invest in an NRO fixed deposit. Typically, all Indian banks offer decent interest rate compared to money lying in international bank with rates much lesser than our Indian bank interest rates for NRI’s.
- You can jointly own and operate an NRO account with an Indian resident. The joint account holder can be your family member, including spouse, children, or parents.
- The interest earned from your NRO account is taxable in India.
- One of the significant features of an NRO account that distinguishes it from other NRI account types is that the money deposited in the account must originate in India only. This can be income earned through property rent, dividends earned from investments, profits from your business operation in India, etc.
- An NRO account is an Indian Rupee-dominated account, which means deposits and withdrawals are permitted in Indian currency.
- Most banks in India require the NRO account holders to maintain a certain minimum balance. Over the years, the minimum required has reduced significantly to Rs. 10,000. Majorly every bank asks to maintain minimum balance. In case if customer do not maintain the balance, may face penalty or charges.
- For NRIs living overseas and have an income source, having an NRO account allows them to invest in the Indian financial market. If you want to invest in mutual funds, you can give your bank a standing instruction to debit your account on a specific day of the month with a particular amount towards the investment.