What is an NRO Account - Tax, TDS, Features & Opening

Open an NRI Savings Account

For Non-Resident Indians (NRIs), managing income earned in India—such as rental income, dividends, or pensions—while living abroad can be challenging. If you're wondering what NRO account is, it is a type of bank account that allows NRIs to deposit and manage their Indian income while providing the flexibility to make local payments and remit funds abroad.

This blog will explore the features, benefits, and key requirements of Non-Resident (Ordinary) (NRO) Accounts, helping you make the best decision for managing your finances while living overseas.

NRO Account: Key Features at a Glance

Repatriation

An NRO Account allows you to transfer your interest income and principal amount from an Indian bank account to a foreign bank account, subject to certain conditions.

Taxation

Any interest earned on the principal in an NRO Account is subject to 30% taxation, deductible at source, in addition to any cess and surcharge.

Ownership

An NRO Account can be opened jointly with a resident Indian citizen on a 'former' or 'survivor' basis. Additionally, it can be opened with another non-resident Indian.

Withdrawal

An NRO Account provides the flexibility to receive funds in either Indian or foreign currency. However, withdrawals can only be made in INR. You can also transfer money from your NRE account to your NRO Account.

Open an NRO Savings Account

Eligibility Criteria to Open an NRO Account Online

The following categories of individuals are eligible to open an NRO Savings account:

• NRIs/PIOs/OCIs
• Spouses of Indian citizens or PIOs
• Indian passport holders at any point in time, or individuals whose parents or grandparents were Indian citizens at the time of the Constitution of India or the Indian Citizenship Act of 1955
• Indian nationals employed in the merchant navy, oil rigs, or airlines overseas
• Indian citizens on student or business visas, or those on deputation abroad by the Government of India, a Public Sector Undertaking, or any other employment visa

To open an NRO Account, you must submit documentary proof of your non-resident status.

Required Documents for an NRO Account

To open an NRO Account, you need to submit the following documents:

• Filled-in application form
• A copy of your Indian passport (If you do not have an Indian passport, please provide your OCI card or PIO proof)
• Visa or residence permit

Tax Implications on an NRO Account

An NRO Account is designed for NRIs to manage income earned in India—such as rent, dividends, or pensions. It's important to note that tax on an NRO Account applies only to the interest earned on your funds, not the entire balance.

Under the Income Tax Act of 1961, interest income is taxed at a flat rate of 30%, plus applicable cess and surcharge. This means that if your account earns, say, INR 100 in interest, approximately INR 30 (plus any additional cess/surcharge) is deducted as tax, leaving you with roughly INR 70 in net interest earnings.

Banks automatically apply Tax Deducted at Source (TDS) on NRO Account interest at this rate. However, if your country has a Double Taxation Avoidance Agreement (DTAA) with India, you may qualify for a reduced TDS rate, ensuring you don't pay more tax than necessary.

This taxation framework ensures that only your earnings are taxed, keeping your principal intact. For further clarification on NRO Account taxation or assistance with opening an NRO Account online, please contact DBS Treasures.

How to Choose Between an NRE & NRO Account

Understanding the differences between an NRE and an NRO Account is crucial for NRIs managing their finances in India. The right choice depends on factors such as income sources, taxation requirements, and repatriation needs.

Here’s a table summarising the key differences between an NRE & NRO Account:

For NRIs earning solely from abroad, an NRE Account ensures seamless fund transfers and tax-free interest. If you have income sources in India, an NRO Account is essential for efficiently managing local earnings.

Total Relationship Value (TRV) for a DBS Treasures NRO Account

Unlike traditional minimum balance for NRO account, a DBS Treasures NRO Account operates on a Total Relationship Value (TRV) model. Here’s what you need to know:

• Initial Deposit: Open your account with a minimum deposit of INR 5 lakhs.
• TRV Requirement: Maintain a TRV of INR 30 lakhs within six months.
• TRV Calculation: TRV includes balances in your savings account, fixed deposits, investments, insurance policies, and mortgage loans (calculated at 40% of the outstanding loan amount).
• Family TRV: TRV is assessed across all accounts within a family relationship.

This structure offers flexibility by considering your total banking relationship rather than just account balances.

How to Open an NRO Account?

Opening a DBS Treasures NRO Account is a simple and seamless process. Follow these steps to get started:

1. Prepare Necessary Documents:
   Ensure you have all required documents ready before initiating the account opening process.
2. Submit an Online Form:
   Visit the DBS Treasures NRO Savings Account page and fill out the form with your full name, mobile number, email address, country of residence, and preferred branch in India.
3. Consent to Communication:
   Agree to be contacted by DBS Treasures for assistance with the account opening process.
   
   After form submission, a DBS Treasures Relationship Manager will reach out to guide you through the remaining steps.

Final Note: If you wish to open an account for your overseas income, you can opt for an NRE account, which is exempt from taxes. To open an NRO Account, get in touch with DBS Treasures, and our Relationship Managers will guide you through the steps.

Frequently Asked Questions

1. Who should open an NRO Account?

   An NRO Account is ideal for NRIs earning income in India, such as rent, dividends, or pensions. It allows seamless management of Indian earnings while ensuring compliance with local regulations. If you're looking for a reliable banking solution to hold and transact funds in India, you can open an NRO Account online with DBS Treasures.

2. Do I need to pay tax for my NRO Account?

   Yes, the interest earned on an NRO Account is taxable in India. As per the Income Tax Act of 1961, interest income is subject to taxation at the applicable rates, including cess and surcharge.

3. Is TDS mandatory for an NRO Account?

   Yes, TDS on an NRO Account is deducted at 30% on interest income, as per Indian tax laws. However, if your country has a Double Taxation Avoidance Agreement with India, you may be eligible for a lower TDS rate. For tax implications specific to your situation, you can consult a tax expert or reach out to DBS Treasures for guidance.

4. Can an NRO Account use UPI?

   Yes, NRIs can now use UPI without a debit card by linking their NRO Account to a UPI-enabled mobile app. This allows for seamless digital transactions within India. However, international transactions and fund transfers abroad are subject to RBI guidelines.

Open an NRI Savings Account