An NRO account is mainly preferred to manage funds earned from sources in India. So, if you have an income source in India, you can opt for the NRO account. The income may include rentals, salaries, property sales etc. You can deposit money in foreign and Indian currency and withdraw in Indian currency from the NRO account. NRO fixed deposits (FDs) help you earn interest on your money. You can park your money for a particular period and earn interest.
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Benefits of an NRO Account
The NRO account can be opened by an OCI (Overseas Citizen of India) and PIO (Person of Indian Origin) along with NRIs. The interest earned on the principal is taxable in the NRO account. Whatever you earn in Indian rupees can be deposited in your NRO account. You can jointly hold the account with your Indian relative or resident. The repatriation processed through an NRO account must be reported to the RBI.
Any money earned in Indian currency, be it rent, interest, sale of property etc., can be saved in the NRO account. This account is useful and mostly preferred where NRIs don’t want to convert or take the amount to a foreign country.
One must remember that the income from an NRO account is considered taxable. However, you can reduce your tax by availing tax benefits if you live in one of the countries with which India has the Double Taxation Avoidance Agreement (DTAA). If you wish to avail of DTAA benefit, you must provide a Tax Residency Certificate (TRC) to the bank as the interest earned on NRO FD is subject to tax deduction at source.
You cannot transfer your funds from NRO to NRE accounts. There are no restrictions regarding the usage of the NRO account, and you get multiple benefits for making use of this account. You can open an NRO FD jointly with an Indian resident or NRI.
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If you plan to open an NRO FD account, you can use net banking or physically go to the nearest bank branch in India. Many banks are offering about 8% interest on NRO FD. However, you must compare the interest rates offered by different banks and take decisions basis the tenure and the amount you will be depositing.
It is crucial to perform due diligence on the services and terms and conditions before you decide to invest your money. The table below will help you compare the interest rates and understand how Rs 1 lakh will grow in five years through an NRO FD.
Data as on respective banks’ website on 20 December 2022.
Highest Interest rate offered on NRO deposits of up to Rs 2 Cr for tenor up to 5 years for all listed (BSE) public & private banks, and foreign banks considered for data compilation. Highest rate offered for up to 5 years (7 days to 5 years) is considered in the table. Banks whose websites don’t mention the data are not considered.
Compiled by BankBazaar.com
