NRO Account (Non-Resident Ordinary Account)

By Manu Rao | Updated March 2026

What Is an NRO Account?

An NRO (Non-Resident Ordinary) account is a bank account in India maintained in Indian rupees by NRIs and OCI cardholders. Unlike an NRE account which only accepts foreign-source funds, an NRO account can receive both Indian and foreign income.

Think of the NRO account as the catch-all account for an NRI's India-connected money: rental income from Indian property, pension, dividends from Indian stocks bought before leaving India, sale proceeds of Indian assets, and maturity of old fixed deposits.

Legal Basis

NRO accounts are governed by:

• FEMA Notification No. FEMA 5(R)/2016-RB — Foreign Exchange Management (Deposit) Regulations, 2016
• Schedule 3 of FEMA 5(R) — Specific provisions for NRO accounts
• RBI Master Direction — Deposits by NRIs (FED Master Direction No. 3/2015-16)
• RBI A.P. (DIR Series) Circular No. 45 (October 8, 2007) — Repatriation limit of $1 million per financial year

Key Features

What You Can Credit to NRO

• Rental income from Indian property
• Dividends from Indian companies
• Pension from Indian employer or government
• Interest on domestic fixed deposits
• Sale proceeds of Indian property or other Indian assets
• Maturity of old resident fixed deposits
• Foreign remittances (NRO also accepts money from abroad)
• Transfer from NRE account (one-way transfer is permitted)

What You Can Debit from NRO

• Local payments in India (EMI, insurance, utility bills)
• Investment in Indian companies on a non-repatriation basis
• Outward remittance up to $1 million per financial year (with Form 15CA/15CB and tax clearance)
• Transfer to NRE is not permitted

The $1 Million Repatriation Limit

This is the most important difference between NRO and NRE accounts. NRO funds can be sent abroad, but with a cap:

• $1 million per financial year (April to March), net of applicable taxes
• This covers current income (rent, dividends, interest, pension) and balances in the NRO account
• Form 15CA must be filed on the income tax portal before the remittance
• Form 15CB (CA certificate) is required for remittances exceeding Rs 5 lakh
• The AD bank processes the remittance only after verifying 15CA/15CB and tax compliance

The $1 million limit was introduced by RBI's A.P. (DIR Series) Circular No. 45 dated October 8, 2007. It applies per person per financial year. If a couple each holds separate NRO accounts, each can remit up to $1 million.

NRO Account for Business Investment

Investments from NRO are treated as domestic investment on a non-repatriation basis. This has two implications:

Advantages

• No FDI cap applies — you can invest in any sector without worrying about FDI limits
• No FC-GPR filing required — the investment is not tracked as FDI
• No valuation requirement at Fair Market Value (though normal Companies Act pricing rules apply)
• Press Note 3 does not apply — even if you are an NRI of Chinese or Bangladeshi origin, investment on non-repatriation basis through NRO is not treated as FDI

Disadvantages

• The invested amount and returns cannot be freely repatriated — subject to the $1 million annual NRO repatriation limit
• Once invested on a non-repatriation basis, you cannot convert it to repatriation basis later
• If you plan to exit the investment and take money abroad, you will be constrained by the $1 million annual cap

Tax Treatment

NRO interest is fully taxable in India:

• TDS at 30% (plus surcharge and health & education cess) is deducted by the bank on interest earned
• For the assessment year 2025-26, the effective rate is approximately 31.2% (30% + 4% cess) for interest up to Rs 50 lakh
• If a DTAA provides a lower rate for interest income, the NRI can claim the lower rate by providing a TRC and Form 10F to the bank. Many DTAAs cap interest taxation at 10-15%.
• Even after TDS, the NRI must file an Indian income tax return if total Indian income exceeds the basic exemption limit (Rs 2.5 lakh)

The contrast with NRE accounts is stark — NRE interest is entirely tax-exempt in India.

Converting Resident Account to NRO

When an Indian resident becomes an NRI (leaves India for employment, business, or other purposes), their existing resident savings account must be redesignated as an NRO account. The process:

1. Inform the bank about your change in residential status
2. Submit a letter requesting redesignation from resident to NRO
3. Provide updated KYC documents (overseas address, passport with visa stamps)
4. The bank changes the account type — the account number may or may not change depending on the bank
5. Old fixed deposits continue at existing rates until maturity, then renew as NRO FDs

Failing to redesignate is a FEMA contravention. Many NRIs leave India and continue operating their old resident account for years — this is one of the most common FEMA violations.

Common Mistakes

• Confusing NRO with NRE. Money in NRO is restricted in repatriation ($1 million cap) and interest is taxed at 30%. NRE has no repatriation limit and interest is tax-free. Using the wrong account for large transactions has permanent consequences.
• Not claiming DTAA benefits on TDS. Banks deduct 30% TDS by default. If your country has a DTAA with India providing a lower rate (say 10-15% for interest), submit a TRC and Form 10F to the bank at the start of each financial year to get the lower rate applied.
• Investing through NRO and expecting free repatriation. An NRI who invests Rs 50 lakh from NRO into a startup and later sells for Rs 2 crore will find that repatriating Rs 2 crore takes multiple years due to the $1 million annual limit.
• Not filing Indian tax returns. NRO interest income, rental income, and capital gains from Indian assets are all taxable. Many NRIs rely on TDS alone and skip filing returns. This creates problems when they apply for tax clearance for repatriation.
• Keeping large balances in NRO savings. With TDS at 30% on interest, NRO savings accounts are tax-inefficient. If you don't need the money in India, remit it abroad (within the $1 million limit) or explore other investment options.

Practical Example

Suresh, an Indian IT professional who moved to Canada in 2018, has the following Indian assets:

• A flat in Pune rented for Rs 30,000/month (Rs 3.6 lakh/year)
• Old fixed deposits with SBI worth Rs 15 lakh
• Shares in an Indian company bought before moving

Suresh redesignated his SBI savings account to NRO when he moved. The rental income is credited monthly to his NRO account. SBI FDs are now NRO FDs, and the bank deducts 30% TDS on the interest.

Suresh provides a Canadian TRC to SBI. Under the India-Canada DTAA, interest is taxable at 15% instead of 30%. SBI applies the lower rate for the next financial year. Suresh saves approximately Rs 22,500 per year in TDS on his FD interest of Rs 1.5 lakh.

When Suresh wants to send money to Canada, he files Form 15CA/15CB. His CA certifies the tax compliance. SBI processes the outward remittance within the $1 million limit.

Key Takeaways

• NRO accounts hold Indian-source income and foreign remittances in INR
• Repatriation is limited to $1 million per financial year with Form 15CA/15CB
• Interest is taxable at 30% TDS — claim DTAA relief with TRC and Form 10F
• Investments from NRO are non-repatriation basis — counted as domestic, not FDI
• Existing resident accounts must be converted to NRO when you become an NRI

Need guidance on NRO account management? Beacon Filing helps NRIs with banking, tax, and repatriation compliance.