What an NRO Account Is and How It Works for Non-Residents

An NRO account lets a non-resident Indian hold and manage rupees in India without triggering tax rules that explore to residents

NRO stands for Non-Resident Ordinary. It is a savings or current account opened by someone who is not a resident of India for tax purposes, and it holds Indian rupees. The account exists because India's tax law treats money earned or held inside India differently depending on where you live. An NRO account lets you keep that money separate from your personal funds abroad, and it comes with specific rules about what you can do with the balance.

The key difference from a regular account is that money in an NRO account is treated as "non-resident funds" under Indian tax law. That matters because it changes how the interest you earn is taxed, and it limits what you can do with the money — you cannot freely move large amounts out of India without following specific steps. If you are a non-resident and you have income in India (rent from a property, a pension, dividends), an NRO account is where that money typically goes.

Key Takeaways

An NRO account is a rupee account for non-residents of India, used to hold money earned or received in India.
Interest earned in an NRO account is taxed at the non-resident rate, which is usually higher than the resident rate and does not get the standard deduction.
You can deposit money into an NRO account freely, but withdrawals and transfers out of India are restricted and require documentation.
An NRO account is different from an NRE account, which holds foreign currency and has different tax and withdrawal rules.
Most Indian banks offer NRO accounts, and you can open one in person, by mail, or through a power of attorney if you are outside India.

Who needs an NRO account and why

You need an NRO account if you are classified as a non-resident for Indian tax purposes and you have money coming into India. The most common reasons are rental income from a property you own in India, a pension from an Indian employer, dividends from Indian shares, or money you inherited from someone in India. If you are working abroad and have no income in India, you may not need one — but if you do have Indian-source income, the tax authority expects it to go into an NRO account.

Non-resident status is determined by where you physically spend your time and where your economic interests lie. If you have lived outside India for more than 182 days in a financial year, you are usually treated as non-resident for that year. The exact rules vary depending on your citizenship and visa status, so it is worth checking with a tax professional if you are unsure. Once you are classified as non-resident, any income earned in India — whether you are physically there or not — should be held in an NRO account.

How deposits and withdrawals work

Deposits into an NRO account are straightforward. You can transfer money from abroad using a wire transfer, or deposit rupees if you are in India. Banks do not restrict how much you deposit. However, withdrawals and transfers out of India are where the rules tighten.

You can withdraw money from your NRO account and spend it inside India without restriction. You can also transfer it to another NRO account, or to a resident's account in India. But if you want to send money out of India to a foreign bank account, you need to follow the Liberalised Remittance Scheme (LRS) rules. Under LRS, a non-resident can remit up to USD 250,000 per financial year out of India, and the money must come from legitimate sources — rental income, salary, inheritance, or investment returns. You will need to provide documentation to your bank showing where the money came from.

Some banks also allow you to convert an NRO balance into foreign currency and remit it, but this requires a separate process and proof that the rupees were earned legitimately. The process typically takes one to two weeks, and your bank will ask for documents like rental agreements, salary slips, or inheritance papers depending on the source of the funds.

Tax treatment of NRO accounts

Interest earned in an NRO account is taxed as non-resident income. This means it is taxed at the rate applicable to non-residents, which is usually higher than the rate for residents. As of now, non-resident interest income is taxed at a flat rate of 20 percent, plus applicable surcharge and cess, with no standard deduction allowed. A resident, by contrast, gets a standard deduction of 50,000 rupees on interest income, which an NRO account holder does not receive.

Your bank will deduct tax at source (TDS) on the interest before crediting it to your account. You will receive a TDS certificate at the end of the financial year, which you can use when filing your tax return in your country of residence. Some countries have tax treaties with India that may reduce the tax rate, so if you are a citizen of another country, it is worth checking whether a treaty applies to you.

The money you deposit into the account is not taxed again — only the interest is. However, if you remit money out of India, you may need to show that you have paid tax on any gains or interest before the bank will process the transfer.

NRO accounts versus NRE accounts

An NRE account (Non-Resident External) is different from an NRO account in three important ways. An NRE account holds foreign currency, not rupees. Interest earned in an NRE account is tax-free for non-residents. And money in an NRE account can be remitted out of India freely, without the USD 250,000 annual limit that applies to NRO remittances.

The trade-off is that an NRE account is meant for money earned abroad. If you have a salary paid into a foreign bank account, you can transfer it to an NRE account in India, and that money stays tax-free. But if you have rental income from an Indian property, that must go into an NRO account, not an NRE account. Some non-residents hold both — an NRE account for foreign-earned income and an NRO account for Indian-source income — to take advantage of the tax benefits of each.

How to open an NRO account

Most Indian banks offer NRO accounts. You can open one in person if you are in India, or by mail if you are abroad. The documents you need are your passport, proof of non-resident status (such as a visa or a letter from your employer showing you work abroad), and proof of address in your country of residence. Some banks also ask for a reference from another bank account holder.

If you are outside India and cannot travel to open the account in person, you can authorise someone in India to open it on your behalf using a power of attorney. The bank will send you the account opening forms by post, you sign them and return them, and the bank will complete the process. This usually takes two to four weeks. Once the account is open, you can manage it online from abroad, and most banks allow you to set up international wire transfers to deposit money.

There is no minimum balance requirement for an NRO account at most banks, though some may ask you to maintain a small balance (typically 1,000 to 10,000 rupees) to keep the account active. If you do not use the account for a long time, the bank may freeze it, but you can reactivate it by making a deposit or contacting the bank.

Frequently Asked Questions

Can I open an NRO account if I am a non-resident but still have a house in India?

Yes. Non-resident status is based on where you live for tax purposes, not on whether you own property in India. If you live abroad and are classified as non-resident for tax purposes, you can open an NRO account. Any income from your Indian property — such as rent — should go into that account.

What happens if I remit money out of India without following the LRS rules?

The bank will not process the transfer if you cannot show documentation of the source of the funds. If you try to move money illegally, you risk penalties from the tax authority and your bank may freeze the account. Always provide the bank with proof of where the money came from before requesting a remittance.

Do I pay tax twice — once in India and once in my country of residence?

You may, unless your country has a tax treaty with India. Most countries do have treaties that prevent double taxation on the same income. You will pay tax in India when the interest is credited to your account, and you may owe tax in your country of residence as well, but the treaty usually allows you to claim a credit for the tax paid in India.

Can I convert my NRO account to a regular resident account?

Yes, but only after you become a resident of India for tax purposes. Once you have lived in India for 182 days in a financial year and are classified as resident, you can approach your bank to convert the NRO account to a regular savings account. The bank will handle the conversion, and the rules will change — you will no longer be subject to the NRO withdrawal restrictions.

Is there a limit to how much I can keep in an NRO account?

No limit on the balance itself. However, if you want to remit money out of India, the LRS limit is USD 250,000 per financial year. Money you keep in the account and spend inside India has no limit.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.