NRIs often face difficulties in managing their India-based income from abroad. It is challenging for an NRI to keep track of accounts in his home country. Primarily, there are two reasons for opening an NRI account. Either an NRI wants to send money back to India or wants to keep his Indian based funs in India. Some NRIs have income in India, such as earn rent from property, business, etc. For them opening an NRO or Non-Resident Ordinary account is the best option. An NRO account allows an NRI to retain income that is earned through assets in India.

5 factors to know before opting for an NRO account

The NRO account allows the NRIs to manage their rupee funds without any hassle. An NRI can earn income in India from sources like rent, pension, dividends, etc. There are several benefits of having an NRO account. Here are some perks of having an NRO account –

1. NRI status

Under Indian tax laws, a person needs to spend less than 182 days in India to be recognized as an NRI. To avail of an NRO account, you need to submit documents that prove your NRI status in the assessment year, as defined under the Indian tax laws. When a person becomes an NRI, he or she is not allowed to hold any savings or current accounts as a residential Indian anymore. To convert a residential account to an NRO account, you are required to submit documents that include two photographs, identity proof, NRI status proof, etc.

Most importantly, for an NRO account, you have to submit the residential proof in the form of your employment details or dependent visa status or a copy of your residence permit in your current overseas location or student status, etc. Further, all the documents are required by a foreign bank that has a branch or embassy in your home country. You are also required to submit your Indian local address proof for an NRO account.

2. Convenience

You can keep your India based income in India by availing an NRO or Non-Resident Ordinary account. In case of emergencies, if you need funds in India, then an NRO account can help you to handle rupee funds without any hassle. NRO account is available in the form of savings and current accounts.

While moving overseas for the employment of education, the easiest way to manage your Indian investments is by creating an NRO account. When you change your existing savings account into an NRO account, then your account number does not change. An NRI can open an NRO account with another NRI or an Indian relative.

3. Withdrawal process and deposit

You can withdraw money from an NRO account for making local payments and for remittance imposed on the income earned abroad. Otherwise, NRIs are not allowed to transfer money for any reason. You can transfer money to an NRE account only within a prescribed limit that 1 USD in a financial year.

With an NRO account, you deposit money both in Indian and foreign currencies. But you can withdraw money only in Indian rupees. Thus, income originated in India can be deposited in an NRO account. The transaction made through an NRO account to another NRO account or any other account is done in rupees.

4. Repatriable benefits

Due to the repatriability limit, it is not possible to repatriate funds freely from an NRO account to any other account. You can remit only 1 USD including tax and all other assets, in a financial year using an NRO account.

One of the benefits of an NRO account is that an NRI can take a loan in India with an NRO account. The loan approval depends on the loan amount, NRI status, NRI income, qualification, repayment capability etc. However, you can not take a loan to invest in real estate or agriculture and for lending money to others.

5. Taxation rules

The income generated by an NRI through an NRO account is taxable. Both the principal amount and the earned interest are taxable. An NRO account is subject git tax and wealth tax. However, the tax on NRO account is deductible depending on current TDS rate. If you want to avoid taxation on the interest earned through NRO account, then you can opt for DTAA or Double Taxation Avoidance Agreement.

When you become an NRI, it is essential to know the perks of NRO account as it is the most convenient way to manage your existing savings or investments in India. If you don’t want to transfer your India based income in a foreign account, then NRO account is the best option for you. These above-mentioned facts may help you while you open an NRO account.

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