What is the Tax on an NRO Account ?
20 May 2022

What is the Tax on an NRO Account ?

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Key Takeaways

Are you an NRI with income sources in India? Do you want to learn about taxation and how it affects interest and income earned in India? What are the types of accounts that you can operate and how does that benefit you? This article will help you find some of the answers you seek.


There are different types of bank accounts that a non-resident Indian (NRI) can pick from - Non-Resident External (NRE) account, Non-Resident Ordinary (NRO) account and a Foreign Currency Non-Resident (FCNR) account.

If you are a non-resident Indian (NRI) settled overseas, with a job and a life in another country, an NRI account allows you to deposit the money earned within India or abroad and benefit from the interest income on the same. For any sort of income in India, you need to have a Non-Resident Ordinary (NRO) account. Whether the income is from a residential or commercial property on rent, pension, or mutual fund units held in India, the earnings can be kept only in an NRO account.

NRO Account Benefits

An NRO account allows you to manage your income in India and earn attractive returns on the money deposited. While the income may be taxable, there are additional benefits, such as the opportunity to invest directly in mutual funds, collect rent and other forms of income, and carry out banking transactions in India while you are based overseas.

You can hold an individual or joint NRO account (with a resident Indian). The money in an NRO account, including foreign currency deposited into it, is maintained in the Indian rupee. If you want to send money to your country of residence after having sold a property or liquidated investments in India, you can deposit the funds in your NRO account and transfer the money abroad. This does however come with a limit of up to USD 1 million per financial year, and you may have will have to pay income tax in India and fill out repatriation forms as well.

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Limitations of NRO accounts

This cap of USD 1 million on the repatriation of funds from an NRO account is one of its limitations. Like the NRE account, the deposits in an NRO account are held in the Indian rupee, however unlike the NRE account the money held is not freely repatriable. The interest income on NRO account deposits is also subject to taxation under the Indian income tax rules.

Tax rules for interest income from NRO account

For those wondering, “is an NRO account taxable”, the answer is yes. In India, the interest earned on deposits in NRO accounts is fully taxable. The interest income on funds in an NRO account is subject to tax deducted at source (TDS). A 30% tax on the NRO account[1], in addition to the applicable cess and surcharge, is levied on the interest income from these accounts.

Documents Required

  • Copy of valid passport (pages with your name, address, date of birth, date and place of issue, expiry date, photograph, address, signature, immigration stamp and visa page, if any)
  • Proof of NRI status through valid Employment/Residence Visa copy or Work / Residence Permit.
  • Proof of an overseas and an Indian address (as per Customer Identification Policy)
  • Copy of Indian PAN card or Form 60
  • Recent passport size colour photograph
  • Additionally, for seafarers: Current work contract and copy of CDC along with the last page of disembarkation stamp & FEMA declaration is required for confirming non-resident status

Final note

Any form of income on funds in an NRO account is taxable in India. However, while the funds in the account may be taxable, there is still the opportunity to earn interest at attractive rates. The additional features of an NRO account, such as the ability to pay bills, and transfer money to dependent family members in India at-will make it a lucrative option for NRIs as well.

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*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.

The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.