NRE and NRO accounts in India by Non-resident

Particulars

Non-Resident Ordinary Rupee Account (NRO Account)

Who can open an account

• NRIs and PIOs
• Individual/entities of Pakistan and Bangladesh shall require prior approval of Reserve Bank of India

• Any person resident outside India for putting through bonafide transactions in rupees .
• Individual/entities of Pakistan and Bangladesh shall require prior approval of Reserve Bank of India.

• Post offices in India may maintain savings bank accounts in the names of resident outside India and allow operations on these accounts

Joint Account

• May be held jointly in the names of two or more NRIs/PIOs
• NRIs/PIOs can hold jointly with a resident relative on ‘former or survivor basis’ (relative as defined in Companies Act,2013). The resident relative can operate the account as POA holder during the lifetime of the NRI/PIO account holder.

•  May be held jointly in the names of two or more NRIs/PIOs.
• May be held jointly with residents on “former or survivor basis’

Currency

Type of Account that can be opened by NRIs/PIOs

Period for fixed deposits

Permissible Credits

• Inward remittance from outside India
• Interest accruing on the account
• Interest on investment
• Transfer from other NRE/FCNR(B) accounts
• Maturity proceeds of investments (if such investments were made from this account or inward remittance)
• Current income like rent, dividend pension, interest etc. will be construed as a permissible credit to the NRE account.

Note:  Only those credits which not lost repatriable character

• Inward remittances from outside India
• Legitimate dues in India
• Transfers from other NRO accounts
• Rupee gift/loan made by a resident to a NRI/PIO relative within the limits prescribed under the Liberalised remittance scheme may be credited to latter’s NRO account

Permissible Debits

• Local disbursements
• Remittance outside India
• Transfer to other NRE/FCNR(B) accounts
• Investments in India

• Local payments
• Transfer to other NRO accounts
• Remittance of current income abroad
• Balances in NRO account cannot be repatriated abroad except by NRIs and PIOs upto USD 1 million.
• Funds can be transferred within the limit of USD 1 million.

Repatriablity

• Not repatriable except for all current income.
• Balances in an NRO account of NRIs/PIOs are remittable upto USD 1 million per financial year (April – March) alongwith their other eligible assets.
• Where an account (current/savings)  is opened by a foreign tourists visiting India, with funds remitted from outside India in a specific manner or by sale of foreign exchange brought by him to India, AD may convert the balance in the account at the time of departure of the tourist from India into foreign currency for payment to the account holder provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than the interest accrued thereon.

Taxability

Operations by Power of Attorney

Change in residential status from non-resident to resident

• NRO accounts may be designated as resident accounts on the return of the account holder to India for any purpose indicating his intention to stay in India for an uncertain period.
• Likewise, when a resident Indian becomes, a person resident outside India, his existing resident account should be designated as NRO account

Loans in India

• AD can sanction loans in India to the account holder/third parties without any limit subject to usual margin requirements.
• In case of loans sanctioned to a third party, there should be no direct or indirect foreign exchange consideration for the non-resident depositor agreeing to pledge his deposits to enable the resident individual/firm/company to obtain such facilities.
• In case of loan sanctioned to the account holder, it can be repaid either by adjusting the deposits or through inward remittances from outside India through banking channels or out of the balances held in the NRO account of the account holder.
• The facility for premature withdrawal of deposits will not be available where loans against such deposits are availed of
• The term ‘loan’ shall include all types of fund based/non-fund based facilities

• Loans against the deposits can be granted in India to the account holder or third party subject to usual norms and margin requirement. The loan cannot be used for relending, carrying on agricultural/plantation activities or investment in real estate.
• The term ‘loan’ shall include all types of fund based/non-fund based facilities

Loans outside India

Reporting

• The transaction in the account which may appear to represent reimbursement in rupees against foreign exchange made available to a person resident in India other than AD, as well as any other transaction of suspicious nature should be reported to RBI.
• The transactions in these accounts shall be reported to the RBI in accordance with the directions issued by RBI from time to time.