An NRO, or Non-Resident Ordinary, account exists for one specific purpose: holding income that originates within India after someone’s residential status has changed to non-resident. Rent from a property in Pune, dividends from Indian shares, a pension from a former Indian employer, interest on domestic investments, all of this belongs in an NRO account, not in a regular resident savings account and not in an NRE account either.
The distinction from an NRE account matters because the two serve genuinely different money. NRE accounts hold foreign income brought into India; NRO accounts hold income generated within India. Depositing India-sourced income into an NRE account, or vice versa, creates a mismatch that complicates both tax reporting and eventual repatriation, since the two account types are treated differently under FEMA.
Interest earned on an NRO account is taxable in India, and tax is deducted at source before the interest is credited, unlike NRE interest, which is tax-free. This is often the first surprise for someone who assumed all NRI accounts carried the same tax-free status. Where a Double Taxation Avoidance Agreement exists with the country of residence, credit can usually be claimed for this TDS, but that requires the account holder to actually file a return and make the claim, not assume it happens automatically.
Repatriation from an NRO account is permitted but capped, generally up to a specified limit per financial year, and requires a chartered accountant’s certification confirming applicable taxes have been paid. Advisors at Ashutosh Financial Services generally recommend planning repatriation timelines around this documentation requirement rather than assuming funds can move out on short notice.
An existing resident savings account doesn’t automatically become invalid the moment someone’s status changes, but it does become non-compliant, and converting it to an NRO account promptly is a formality that’s easy to delay and inconvenient to fix later. Ashutosh Financial Services continues to help NRIs get this transition handled correctly as part of its onboarding process for new NRI clients.
