NRO Account Compliance: A Complete Guide
July 03, 2025

NRO (Non-Resident Ordinary) Accounts allow NRIs (Non-resident Indians) to manage their income or deposits generated in India. With an NRO account, you can receive funds in either Indian or foreign currency. The account is maintained in Indian Rupees (₹) based on prevailing exchange rate (if you receive funds in foreign currency that is).
However, based on FEMA (Foreign Exchange Management Act) guidelines, there are certain rules and regulations associated with NRO Accounts that depositors should be aware of. In this blog, we have simplified NRO Account compliance rules and regulations so that NRIs can open and maintain an NRO Savings and/or Fixed Deposit Account worry-free.
Who Qualifies as an NRI?
An NRO account is a rupee-denominated account that allows NRIs to manage their income earned in India. This includes income from rent, dividends, pension, interest, etc., as well as proceeds from assets like immovable property acquired in India. NRO accounts can be opened as current, savings, recurring, or fixed deposit accounts.
To open an NRO account, you need to be a person resident outside India as per the Foreign Exchange Management Act (FEMA), 1999. Now, who qualifies as an NRI? As per FEMA rules, any Indian citizen residing overseas (excluding Nepal and Bhutan) for more than 182 days in a financial year can be deemed as an NRI. Or if an Indian citizen has demonstrated an intent with supported documents to reside abroad for an uncertain period can be deemed as an NRI.
This definition or classification of NRIs, however, is slightly different from the classification set by the Income Tax Act, 1961. As per the rules, an individual cannot be considered as an NRI if he/she have been in India for 182 days or more during the previous Financial Year; or were in India for a period of 60* days or more during the previous Financial Year and 365 days or more during the four years immediately preceding the previous Financial Year.
Now, let's understand how NRIs can maintain compliance to avoid any hassles.
Maintaining NRO Account Compliance
To maintain compliance with your NRO account, it's essential to be aware of the permissible credits and debits allowed under the regulatory framework. Let's explore these two key aspects of NRO account compliance:
1. Permissible Credits
(i) Proceeds of remittances from outside India through normal banking channels received in freely convertible foreign currency.
Example: Mr. Sharma, an NRI, receives a rental income of USD 1,000 per month for his property in India. He can credit this amount to his NRO account as it represents a legitimate credit.
(ii) Transfers from rupee accounts of non-resident banks.
Example: Ms. Patel, an NRI, wants to transfer funds from her rupee account with a non-resident bank to her NRO account in India. This transfer is permissible under the regulatory guidelines.
2. Permissible Debits
(i) Local payments in Indian Rupees, including investments in India, subject to compliance with relevant regulations made by the Reserve Bank of India.
Example: Mr. Kumar, an NRI, wishes to invest in shares of an Indian company. He can make the payment for these shares directly from his NRO account as it falls under the category of local payments.
(ii) Remittance outside India of current income like rent, dividend, pension, interest, etc., earned in India.
Example: Ms. Rao receives dividends from her Indian investments and wants to remit them to her overseas bank account. She can do so by debiting her NRO account as it constitutes remittance of current income.
Tax Compliance and Documentation
It is essential to comply with tax regulations while maintaining your NRO account. Ensure that you file your income tax returns in India and declare any income earned within the country. The remittances from your NRO account (net of applicable taxes) should be made based on appropriate certification by a chartered accountant. 30% TDS plus surcharge and cess are applicable on the interest income.
However, to avoid double taxation in India and your country of residence, you can avail tax credit under DTAA (Double Taxation Avoidance Agreement). We have explained it here.
Documentation required for opening and maintaining NRO Account compliance includes:
- Application form for converting resident Indian account to an NRO account.
- Identity proof and address proof.
- Passport-size photographs.
- Foreign Account Tax Compliance Act (FATCA) declaration or Common Reporting Standard (CRS) as applicable.
- Permanent Account Number (PAN) card or Form 60.
As per FEMA guidelines, once you are classified as an NRI, you have to convert your existing Savings Account to an NRO Account.
Final Thoughts
Compliance adherence is a must to seamlessly operate your NRO account. By understanding the regulatory guidelines, you can ensure a hassle-free banking experience from abroad.
Ujjivan SFB offers NRI Savings and Deposit Accounts that come with multiple benefits, including zero balance maintenance criteria, higher interest rates, safe and secure transactions, easy access to funds, and more. Book an NRI Account with us and enjoy a seamless banking experience. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.
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FAQs
1. Can I transfer funds from my NRE account to my NRO account?
Yes, you can transfer funds from your Non-Resident External (NRE) account to your NRO account, subject to certain conditions and regulations. Also, you need to ensure that you have cleared your tax obligations before switching to NRE account.
2. Are there any restrictions on remittance of sale proceeds of immovable property from an NRO account?
Yes, there are restrictions on remitting the sale proceeds of immovable property. The remittance facility is not available to citizens of certain countries, including Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal, and Bhutan.
3. Do I need a PAN card to open an NRO account?
Yes, a PAN card is mandatory for opening an NRO account. In the absence of a PAN card, you can submit Form 60 as per the regulatory guidelines. This is a key aspect of the NRO Account regulatory guide.
4. Can I make investments in India through my NRO account?
Yes, you can make investments in India through your NRO account subject to compliance with relevant regulations made by the Reserve Bank of India. It is advisable to consult with your bank for specific investment options and procedures.
5. How can I repatriate funds from my NRO account?
You can repatriate funds from your NRO account within the permissible limits set by the Reserve Bank of India. The repatriation should be done through proper banking channels and after complying with applicable tax regulations. Currently, you can repatriate up to USD 1 million per financial year.
6. What is the difference between an NRO and an NRE account?
An NRO (Non-Resident Ordinary) account is designed to manage income earned in India, while an NRE (Non-Resident External) account is meant to manage income earned outside India. The principal and interest in an NRE account are fully repatriable and tax-free, whereas the interest earned on an NRO account is subject to tax and only the principal amount up to USD 1 million is repatriable after payment of applicable taxes.
7. Can I have both an NRO and an NRE account?
Yes, as an NRI, you can have both NRO and NRE accounts simultaneously. Each account serves different purposes and has different benefits, allowing you to manage both your Indian and foreign income effectively.
8. Are there any limits on the amount of funds I can remit from my NRO account to my overseas account?
Yes, the Reserve Bank of India allows NRIs to remit up to USD 1 million per financial year from their NRO account, subject to applicable taxes and documentation requirements. It is advisable to check with your bank for the specific remittance process and limits.
9. Is it possible to convert an existing resident savings account to an NRO account?
If you have an existing savings account in India and you are classified as an NRI, you are required to convert it to an NRO account. This can be done by submitting a request to your bank along with the necessary documents proving your NRI status. It's a regulatory mandate; failure to do so may incur penalty charges.
10. Can NRO accounts be held jointly with residents and/or non-residents?
Yes, NRO accounts can be held jointly with both residents and non-residents.
11. What should I do if I hold a joint NRO account with a resident?
If you hold a joint NRO account with a resident, it is essential to inform your bank about your current residential status and ensure that your resident bank account is converted to an NRO account.
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