NRIs who have income both in India and foreign countries often face troubles while handling their finances. They find it challenging to manage bank account in two states and at the time of repatriating money in their home country. So, an NRI can open NRE, NRO. PIO, FCNR account, etc. Mainly, there are two reasons for opening an NRI account. Either the NRIs want to repatriate their overseas earned money to India or keep their India based income in India. You can also opt for Standard Chartered NRO account.
An NRO or Non-Resident Ordinary is used if an NRI wants to keep their India based income and earning in India. But before you avail of an NRO savings account, you must know the benefits that will be available to you and if those benefits suit your requirements. Hence, one needs to know the perks of having an NRO before going for it.
Purpose of NRO account
NRIs can keep their India based income in India by using an NRO or Non-Resident Ordinary account. It also helps NRIs to manage their accumulated rupee funds without any hassle. Therefore, NRO accounts are available in forms of savings and current accounts. Besides, when you become an NRI, then it is the easiest way available for operating the funds or investments that you have in India. Because it gives you the liberty to covert your existing savings, account into an NRO account and your account number doesn’t change. An NRO or Non-Resident Ordinary Rupee account can be opened by an NRI with another Indian relative or an NRI.
The income earned by NRIs under NRO or Non-Resident Ordinary Rupee account is taxable on the earned interest and credit balances. It is also subject to wealth and gift tax. But the tax charged on an NRO account can be deducted depending on current TDS rates. If you avail DTAA or Double Taxation Avoidance Agreement facility, then you can successfully avoid that is imposed on the interest earned through an NRO account.
NRIs cannot repatriate money freely from an NRO or Non-Resident Ordinary Rupee account because one can only remit 1 USD during an assessment year including taxes and all the other assets. However, an NRI can apply for a loan against the deposits that he or she has in India. The loan will be approved depending on the required amount of the NRI after considering their academic qualification, salary amount, repayment capability etc. But the NRI can not use the loan amount for carrying on plantation or agricultural activities, lending to someone else or investments in real estate. Through an NRO account, an NRI cannot apply for a loan outside of India.
Deposits and withdrawals process
Through an NRO account, NRIs can deposit cash in both international and Indian currency and withdraw the money in Indian currency, so the income originated in India can be deposited only in the NRO account. So all the credits made to an NRO account by another NRO account or from outside India have to be made in rupees or Indian currency. Besides, there is a yearly limit for transferring money by an NRO account.
An NRO account can be debited for making local payments or remittance imposed on the current income earned abroad or transferring money to other NRO accounts. Apart from that, the NRIs are not allowed to transfer money overseas through an NRO account. Further, NRIs can transfer funds to NRE accounts within the prescribed limit that is 1 USD in a financial year.
To open an NRO account, an NRI has to submit documents as proof that he or she is a Non-Residential Indian in the current assessment year as defined under the Indian tax laws. No sooner a person becomes NRI than he is not allowed to hold bank accounts as a residential Indian. For converting a residential account to an NRI account, one needs to submit documents including NRI status proof, two photographs, identity proof, proof of foreign address, etc.
Along with that, one needs to submit his proof of residence abroad in the form of dependent visa status or employment details or student status or a copy of his resident permit in the overseas location. Besides, these documents are required to be attested by an Indian bank that has a foreign branch, Indian embassy, or notary. You can also provide a local Indian address to accelerate the process. The Indian local address proof also has to be attested by designated authorities.
Being an NRI, you must not be clear about the benefits of an NRO or Non-Resident Ordinary accounts like how you can manage your investments and income. These points, as mentioned above, can help you to decide why you should use an NRO account as an NRI.