All you need to know about NRO accounts

An NRO account is a non-resident ordinary account. It lets you park your rupee funds gathered from earnings in India. It also offers free money transfer at a competitive rate structure. You could also add an Indian resident as a joint holder to your NRO account so that he/she can operate your account. There would also bea free mandate card and chequebook for your family in India and this would give then anytime and anywhere access to your account.

Now let us have a deeply detailed look into what an NRO account actually is.

A non-resident ordinary account or an NRO account is a savings account essentially where you can maintain and manage your income earned in India for instance, the rent collections, the dividends, pension etc. Whenever you choose an NRO account you can be assured of and efficient management of your rupee earnings in India while you are staying abroad. There is also the facility of an easy redesignation of your account when your status is changed from resident Indian to a non-resident Indian.
There are a lot many benefits when you are going in for an NRO or a Non-residentordinary account. These benefits are enlisted below
You will get a higher yield post-tax: this can be done by availing the DTAA benefit facility.

You can also avail the benefits of low cost and hassle free money transfer which can be made available through various online and offline modes at extremely competitive exchange rates.

Very low balance is required in order to keep the account in the up and running status. The minimum account balance to be maintained is as low as Rs 10,000 only. If this balance is maintained, the account will be in the running status.

You will be able to access your account anytime and anywhere with domestic ATM cum debit cards, you will also have convenient and access to over 11000 ATMs, in the branches all over India and the phone and internetbanking as well.

You could also be benefitted from the interest rates that are calculated on daily closing balances at 4% per annum. The interest is paid half-yearly in June and December.

The interest that you earn in the current financial year is completely repatriable but only after the tax is deducted.

You can also avail simple and convenient money transfer tracking service with anonline transfer to more than a 100 banks in India.

The mandate holder would get a free chequebook and an ATM card so that he/she can access your account from anywhere and at anytime

Facts you need to know about the NRO account

When a resident Indian becomes an NRI, the whole aspect of financial management will change. The normal rules and regulations pertaining to the residents will be completely for those who come under the NRI category. In this case, the NRI individual will be required to open an NRI account, which can either be the NRE or the NRO account. But in order to access funds and operate any investment in Indian, you can convert the current savings account into an NRO account.

But what is an NRO account? This account can be used to receive foreign remittances and can have a joint holder who is an Indian resident. In addition to this, the RBI also permits repatriations abroad, which is limited by a maximum annual amount.  At the same time, the interest that is earned in this account and credit balances are subjected to respective tax brackets. It is also subjected to wealth and gift tax.

Now that you are aware of what is an NRO account given below are some of the factors that you need to be aware of. They include:

Opening the account: In order to open the account for NRO, you will need to provide certain documents. It is important to provide documentary proof that you, as the account holder is now a non – resident, as defined under the government regulations and Indian tax laws. Once an individual becomes an NRI, he or she is not allowed to hold any bank accounts under the Indian residency status.

Converting the resident saving account into the account for NRO: As mentioned previously, you can get your resident savings account converted into the NRO account when required. However, you will need to submit a certain set of documents. As a part of the conversion process into the non – resident account, you will need to provide documents supporting your identity, your NRI status proof, proof of foreign address and two photographs.

Attesting proof of documents: When submitting the documents for the account conversion, especially when it comes to the proof of residence abroad, it can be submitted in the form of employment details, student status or dependent visa status. It can also be doneunder the copy of a resident permit in the overseas destination. However, this documented proof must be attested by the Indian embassy, notary or an Indian bank with an overseas branch. You can contact your bank to know which are the official institutes they recognise and accept.

Provision of local Indian address: If you as an NRI would want to ensure a convenient ease of operation, you can always mention a local Indian address. Like the previously mentioned documentation process, you will need to provide proof of the address along with attestation proof. 

Steps to take when converting a resident account to an NRO account

As an NRI, you will not be able to hold any residential bank accounts or have the authority to use the functions of them. At the same time, these accounts will be converted into an NRI account, which will provide you with the financial assistance and function you require when settled abroad. This account will either be converted into the NRE or NRO account.

The NRO account can be opened with funds which are either remitted from abroad or even generated in India. Like the local savings account, these accounts will have certain restrictions on repatriations of the proceeds to the country you are residing in. Here are the steps you will need to take when converting your account to the NRO account.

Step 1: Submission of form

Plenty of banks provide a specific form when there is a requirement to convert an existing saving account to an NRO account. These forms can be requested from the bank. Alternatively, you can also apply for the conversion process online and download the form from the bank website. A single form can normally be used to convert all your saving accounts opened in a single bank, against the same customer ID.

Step 2: Provision of documents

While converting a regular account to an NRO account, in a way, you are opening a new account. Therefore, you will also need to provide a filled form for a new account opening, in order to support this conversion request. In addition to this, the address proof of the overseas address must also be provided. You will need to submit copies of your passport, valid visa or even your work permit. You also need to submit your OCI/PIO card.

Step 3: Providing the right funding
The requirement for the resident saving account and the NRO account is different. For one, the account in question must have a minimum balance of 7500 Rs. Before being converted to the NRO account. If there is the insufficient amount, the necessary steps must be taken.

Step 4: Submission of documents
The documents must be submitted to the required bank branch. In the event you have already traveled outside, the form and the documents must be attested by the Indian embassy. It must be then sent to the branch.

Step 5: Change of account status

Once the required forms and documents have been received by the bank and verified, the status of the account will change. It will be re – designated from a residential savings account to the required NRO account. This re – designation may not change the account number, but it may be flagged off as an NRO account amongst the bank records.

What are the features of the NRO account you should be aware of?

When a citizen of India leaves, the country he/she becomes an NRI and thus he/she has to open an NRO account, an NRE account or an FCNR account. They differ in several ways and when making the choice as to which one to open. Given below are some salient features which must be noted for each option:

1. Eligibility

An NRO account can be held by anyone outside India unless they are in Nepal or Bhutan. This restriction is not placed on NRE and FCNR account holders.

2. Joint accounts

A joint account can be held with residents in an NRO account. With an NRE or FCNR account, you cannot hold a joint account with a resident; you can only hold it on a ‘former or survivor basis.

3. Currency in which account is used

An FCNR account is the exception in this case as both NRE and NRO accounts use rupees whereas an FCNR account uses Pound Sterling, US dollars, Japanese Yen, Euros, Canadian Dollars and Australian Dollars.

4. Repatriability

Repatriability is the ability to transfer money from one country to another. The main difference between an NRO account and other accounts is that an NRO account is not repatriable except under certain conditions.

5. Type of account

An FCNR is a term deposit account whereas NRO and NRE accounts are fixed deposits, savings, current as well as recurring account types.

6. Period of fixed deposits

For an FCNR account, fixed deposits have a period in between 1 and 5 years whereas with NRO and NRE accounts, fixed deposit accounts have the same conditions that apply to resident accounts.

7. Rate of interest

The rate of interest on NRE and NRO accounts are much more flexible than with FCNR accounts which have interest rate ceilings and floors.

8. Tax on interest income

It must be noted that the NRO account is the only one which has taxable income.

9. Loan amount

Only with an NRO account are there ceilings or limits on how much you can loan.

These are just some of the characteristics of an NRO account. There are many other salient features which must be noted and these features are crucial in coming to the decision of which type of bank account is best for you as an NRI in your particular situation.

Top mistakes you should avoid as a NRI account holder

As one travelling abroad and settling down, you will get a lot of access to financial benefits. One of these includes opening the NRI account. Unfortunately, the Indian government makes a multitude of rules for NRI’s that regular citizens of India do not have to contend with. Many NRI’s do not know about them and then get into trouble when they are told. Avoid these problems, here is some information that can make you aware:

1. Not changing resident savings account to an NRO account
It is a fact that NRIs are not allowed to hold a regular resident savings account. However, many of them still do unaware of this fact. It has been said by law that when an Indian citizen’s status changes to an NRI by FEMA rules, they have to convert their account to an NRI account, specifically, an NRO account. All incomes which you received in India, as well as all incomes you need to pay in India, have to be deposited into this account. You must also give the bank adequate notice that you are closing the resident savings account. Usually, the timeframe given for this is 3 months. You do however have the option to change the bank you have your account in. However, an NRO account has to be opened in the bank you are opening your new account in. An NRO account is repatriable. This means you can send the money you earn abroad back to the resident country.

2. Having a PPF account
A PPF account is another account which NRIs are not allowed to have but often keep. The rules for a PPF account which is already opened are extremely convoluted. The rules for these have changed a lot over the years but the current rules are that you can continue with your PPF account when you are an NRI but you have to withdraw the funds after maturity. However, it must also be noted that repatriation is also allowed from an NRO account and this makes even the PPF repatriable if you have followed the legal rules. It must further be noted that if your PPF is not matured then you can continue to keep your PPF in five-year blocks. This is termed as “extension without contribution”.

These are just some of the complications that NRIs have to face at first. It is crucial that you find a banker who knows the Indian system well and can advise you about the best possible way to proceed with the NRI account such as the NRO account as well as a PPF account.