Over and over again, a Non-Resident Indian with income both overseas and in India faces trouble in managing their funds. They also find it complicated to track bank accounts in a new country, and when trying to repatriate funds to their home account as well.

NRE & NRO accounts might lend you a hand in such a situation.

NRE or Non-Resident Rupee Account

The NRE or Non-Resident Rupee Account is an Indian Rupee denominated account that offers you absolute security. It can be in the shape of savings, current, recurring or fixed deposits. You can deposit no more than foreign currency in NRE or Non-Resident Rupee Account, which gets transformed into INR during deposit. As a result, you might repatriate the funds in this account any time. And the interest is not liable to tax.   Transferring funds from the resident country to India is free of charge, and you can earn more interest as well. The international debit card allows you to manage and withdraw funds 24*7.

NRO or Non-Resident Ordinary Rupee Account

An NRO account is a savings or current account apprehended in India for the NRIs to deal with their earnings made in India. For this reason, it is an excellent way for account holders to deposit and supervise their accrued rupee funds. As soon as you deposit the funds to the NRO account, the foreign currency is converted to INR as a matter of course.  You can apply for the Non-Resident Ordinary Rupee Account in cooperation with a resident Indian in which the bank will provide an NRO debit card to both of you. It is practical to transfer funds from your current NRE account as well.

What is the difference between NRE, NRO and FCNR account?

In essence, the differences are here:

• Repatriation

For the most part, NRO account has limited repatriability. That means you cannot dispatch more than 1 million USD together with taxes from your NRO account in a financial year. It also needs an undertaking together with a certificate from a chartered accountant. Nevertheless, repatriation is free for NRE account holders for principal and interest equally.

• Deposit of Rupee Funds produced in India

If an NRI is earning income, rental fee, dividends and so forth in India, they can deposit such earnings in NRO accounts. You cannot park any earnings you make in India in the NRE account.

• Tax treatment

An NRE account is tax-free (no income tax, gift tax or wealth tax) in India. Nevertheless, the interest received in NRO account and credit balances are subject to the respective income tax bracket. They are also contingent on relevant wealth and gift tax.

• Joint account holding

You can open a joint NRE account only if both the interested parties together are NRIs. Nevertheless, you can open an NRO account with one more NRI or a resident Indian who’s in close relation. It is stated under Section 6 of the Companies Act 1956.

• Flow of funds

Contrasting to an NRO account, you can repatriate the wealth in a foreign country in any currency for an NRE account.

How much money can I deposit into the NRO account?

There is no restraint on depositing funds to your NRO account. On the other hand, you would require proving the source of funds. It is likely that you received any earnings in cash and you integrated it as your earnings in your tax return and put down the same in your NRO account.

There are no boundaries for depositing. However, there might be limitations on bringing the foreign currency notes into India. Furthermore, any money acquired on the trade of property (more than the reported sum) might not be deposited as it might lead to an investigation by the income tax department.

What are the advantages and disadvantages of NRO Account?

Advantages of NRO:

• Higher yield post-tax
• Low cost and Hassle-free money transfers
• Low balance needed
• Anytime, anyplace account access
• Favorable interest rates
• Easy movement
• Joint holding
• Easy re-designation
• Free cheque book as well as ATM card for mandate holder
• Specially selected special offers
• FREE PO Box service
• Tax deducted at source
• Double Taxation Avoidance Agreement (DTAA)
• Earn a higher post-tax return
• Availability of DTAA benefit on your NRO accounts

 Disadvantages of NRO:

• The interest that’s acquired on balances in NRO Accounts is not exempted from Indian Income tax. As an alternative, income tax is abstracted at source (TDS) during the time of reimbursement of interest by the bank.
• Balance detained in NRO account cannot be repatriated. No remittance in foreign currency is permissible without prior approval of Reserve Bank. So, on the whole, the funds stay 'as is' in India.

What papers do I need to submit to open an NRO Savings Account?

Here are all the documents you need:

Photocopies of:

• Passport
• Valid work permit
• PAN Card copy or Form 60
• FATCA or CRS Declaration
• CKYC Annexure
• Self-attested photocopies
• Address proofs

Can I carry on managing my resident account if I open an NRI account?

In consonance with the FEMA regulation, it is against the law for NRIs to have the resident savings account in India. You will be required to switch your resident savings consider into an NRO account. If you carry on making use of your resident account, you may bring substantial penalties upon yourself.

Are my NRO Savings Account funds repatriable?

The principal amount of the NRO Savings Account is not repatriable and can be used just for local payments. On the other hand, the interest earned is completely repatriable.

Is interest earned on NRO Savings account liable to tax in India?

Yes. The interest earned on NRO saving account is liable to tax in India as both are measured as earnings in India and assessable to tax under income tax law. The interest earned on NRO Savings account is subject to tax deduction at source and chargeable at higher TDS rate of 30% in addition to the applicable cess and surcharge.

Is money deposited in NRO account from Rental Property taxable?

If you are getting the funds straight into your NRO account, the cash is taxable in India even though you are a Non-Resident Indian. It is because revenue received in India is chargeable for tax in India to each person; regardless of he is a resident or a non-resident Indian. Interest on NRO account is taxable to you as well in India as per appropriate slab rate - the bank will take 30.90% TDS on this payment.

What service charges are applicable for NRE / NRO savings account?

Keep in mind that the interest earned on NRE Savings Account is not liable to tax in India. On the other hand, interest earned on NRO saving account is liable to tax in India as both are measured as income in India and chargeable under income tax law.

Can I change Resident Account to NRO account?

Every time an individual becomes a non-resident Indian, he is needed to either shut down his existing savings account or change it to a Non-Resident (Ordinary) or NRO account. You can open NRO accounts with funds either remitted from overseas or made in India.

How is NRO account taxed?

No tax is applicable in India on the finances and funds lying in your NRE accounts. On the other hand, interest earned on NRO account is assessable for tax at the rate of 30% in addition to the applicable cess as well as the surcharge. If the interest goes beyond Rs. 5 million all through the financial year then an extra surcharge of 10% would be applicable as well.

What is the restriction for repatriating money out of NRO account?

• Contingent on the restraint of USD 1,000,000, you can repatriate your present income for the current financial year in which the remittance is required to be made.
• Can the proceeds of the sale of immovable property be repatriated out of NRO account? What is the process to repatriate such proceeds?
• Repatriation is a reasonably straightforward process at the moment with the introduction of modern banking and online filing facilities offered by the income tax department of India.
• Funds in NRE or FCNR account are repatriable without restraint, and for this reason, there is no requirement for any agreement from authoritarian authorities.
• However, funds in NRO account can be repatriated up to no more than a maximum of USD 1 Million per financial year per person.
• Primarily, you should first fill out and submit 15CA application form with IT Department of India.
• After that, you have got to acquire form 15CB from a Chartered Accountant. It officially states that you have paid essential taxes on the sum that is going to be repatriated.
• Subsequently, you are obliged to submit Form 15CA and 15CB to an official agent or bank that will assist you to get foreign currency and repatriate the same to your bank accounts in a foreign country.

Can I transfer funds from my NRO to an NRE / FCNR account or vice-versa?

Yes, it's entirely possible for shift money from NRE account to NRO account, but the reverse is not doable. You can assume this as NRE account is more dominant than NRO since interest earned on NRE account is not liable to tax in India and NRE account doesn't permit INR deposit.

Why do I obtain just a domestic debit card for the NRO account?

If you open a new NRO savings account, you will acquire a VISA domestic debit card that can be used for cash withdrawals in your country in addition to the use at merchant sites in India. Furthermore, an International debit card is not issued for NRO accounts as funds in NRO account are not repatriable without restraint.

I am holding an ATM card and would like to apply for an NRO domestic debit card. What are the fees for getting NRO domestic debit card?

You can get the NRO domestic debit card with no trouble with maximum cash withdrawal value of Rupees 25,000 per day and maximum transaction limit value of Rs. Thirty-five thousand per day at merchant institutions.

What can be the permitted credits into an NRO Account?

Permitted credits into a NRO Account take account of transfers from rupee accounts of non-resident banks, remittances acquired in permitted currency from out of the country by means of regular banking channels, allowable currency tendered by account holder throughout his provisional visit to India, legal dues of the account holder in India, such as present income like rental fee, dividend, retirement fund, interest, and so forth, sale proceeds of possessions together with permanent property obtained out of Indian rupee or foreign currency funds or as a result of inheritance or bequest.

What can be the permitted debits from the NRO Account?

Permitted debits from the NRO Account take account of all local payments in rupees together with payments for investments as specified by the Reserve Bank and remittance in a foreign country of present income like rental fee, dividend, pension, interest, and so on, net of applicable taxes, of the account holder.

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