All banking and investment transactions of a non-resident in India are regulated under the Foreign Exchange Management Act (FEMA). Non-Resident Indian Citizens and Persons of Indian Origin (PIO) are collectively referred to as Non-Resident Indians (NRIs). They are allowed to have three types of bank accounts in India. Non-Resident Ordinary (NRO), Non-Resident External (NRE) Account and Foreign Currency Non-Resident (FCNR) Account in India.
Who can open a Non-Resident Ordinary (NRO) Account
As soon as a person leaves India with the intention of staying outside India for an indefinite period, he becomes a non-resident under the provisions of FEMA, irrespective of his physical stay in India. Once you become a non-resident, you should immediately inform your bank about your non-resident. On receipt of such intimation, banks will designate all your existing bank accounts as NRO accounts. You can also open a new NRO account once you become a non-resident. An individual who is not an NRI can also open an NRO account while traveling to India for a limited purpose during his stay in India. However, a citizen of Pakistan or Bangladesh requires prior permission to open an NRO account in India.
NRO account can be opened by any resident or jointly with any other NRI. All NRO accounts are of rupee denomination and can be in the form of savings accounts, current accounts, recurring accounts or fixed deposit accounts. Apart from the Indian citizen who has become a non-resident, a non-Indian citizen who is a Person of Indian Origin (PIO) can also open an NRO account in India. Your NRO account can also be operated by any resident holding your power of attorney.
What debits and credits are allowed in NRO account?
Any amount which is remitted to India from abroad through proper banking channel can be credited to the NRO account. NRIs can deposit foreign currency up to $5,000, while in India supported by a currency declaration form. Money can also be transferred from NRO account of any other NRI to NRO account. All your regular Indian income like rent, dividend, pension etc can also be credited to your NRO account. A resident who is your close relative can also gift or lend money to you in Indian Rupees and the same can be credited to your NRO account. The proceeds from the sale of property owned by NRIs can also be credited to the account.
Up to $1 million can be remitted outside India or transferred to your NRE account each year, subject to certain procedural compliances, from an NRO account. in money NRO Account Can also be used to make regular local payments in Rupees like rent of property, taxes. This amount can also be used to invest in India on a non-repatriation basis.
Tax and TDS provision on interest on NRO account
Though interest on savings bank account for resident Indians is taxable, there is no provision for deduction of tax at source on it, but banks are required to deduct tax at source on interest deposited on all NRO accounts including NRO savings account. the wanted. All individual and HUF whether resident or non-resident, are entitled to deduction under section 80TTA up to Rs. 10,000/- in respect of interest on savings bank account.
Interest on NRO fixed deposit and recurring deposit accounts maintained by an NRI is taxable to resident as well as NRIs. Resident Form No. 15G or 15H for non-deduction of tax at source on such income but the same facility is not available to a non-resident.
Transfer from NRO account to NRE account or remittance from NRO account outside India
Transfer money from NRO account to one NRE Account It is treated like a foreign remittance and you need to follow the prescribed procedure. You will have to obtain the Chartered Accountant’s certificate and submit it to the bank. If the amount to be transferred represents any income that is taxable in India, the CA is required to certify that sufficient taxes have been duly paid in respect of the money to be transferred.
Balwant Jain is a Tax and Investment Specialist and can be contacted at jainbalwant@gmail.com and @jainbalwant on Twitter.