Many Goans travel abroad and find employment in due course of time. One of the issues they face is pondering over how to arrange for payments of expenses back in India. In such cases, the Non-Resident Ordinary (Rupee) or NRO account option is generally suggested by local banks.
ACCOUNT TYPE
An NRO account is opened if a non-resident person earns income and/or incurs expenses in India and is in Indian rupees. It can be a Savings, Current, Recurring or Fixed Deposit account.
OPENING THE ACCOUNT
An NRO account can be opened by any person, resident outside India, for carrying out legitimate transactions in rupees, subject to the RBI’s directions. For an individual/entity of Pakistan nationality/origin and entity of Bangladesh origin, the RBI’s prior approval is required to open an NRO account.
An NRO current/savings account can be opened by a visiting foreign national with funds remitted from outside India through a banking channel or by sale of foreign exchange brought by him to India.
An NRO current/savings account can be opened by a visiting foreign national with funds remitted from outside India through a banking channel or by sale of foreign exchange brought by him to India.
The account balance may be paid to him when departing from India provided the account was maintained for not more than six months and was not credited with any local funds, apart from the interest accrued on the account.
JOINT ACCOUNT
It can be a joint account of two or more persons. It may be held jointly with resident/s who are close relative/s of the primary account holder on ‘former or survivor’ basis.
PERMISSIBLE CREDITS
The following amounts can be credited to this account:
Freely convertible foreign currency remittances from outside India through normal banking channels
Freely convertible foreign currency tendered by the account holder during his temporary visit to India (to be supported by a currency declaration form if deposit exceeds US$ 5000 or equivalent in cash). Rupee funds must be supported by encashment certificate, if they represent funds brought from outside India
Transfers from rupee accounts of non-resident banks
Legitimate income of account holder in India like rent, dividend, pension, interest, etc.;
Sale proceeds of assets including immovable property acquired out of rupee/foreign currency funds or by legacy/inheritance
Gift/loan in rupees to the NRO account holder by his close relative by crossed cheque/ electronic transfer. The gift/loan amount must be within the overall limit of US$ 200,000 per financial year permitted under the Liberalised Remittance Scheme (LRS) for a resident individual.
For an individual/entity of Pakistan nationality/origin and entity of Bangladesh origin, the RBI’s prior approval is required to open an NRO account.
PERMISSIBLE DEBITS
The following amounts are permissible debits to this account:
Local payments in rupees including payments for investments in India subject to compliance with RBI regulations
Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder
Remittance up to US$ one million, per financial year (April - March), for all legitimate purposes
Transfer to NRE account of NRI within the overall ceiling of US$ one million per financial year subject to payment of tax, as applicable
Next week, we will learn about the implications of taxability, repatriation, loan options and change in residence status on the NRO account.
This article seeks to present, in simple words, legal issues and doubts that we face in our day-to-day lives. It should not be taken as a substitute for a lawyer.
(The writer is a lawyer and company secretary with a focus on education, legal issues and governance, and enjoys working with individuals and organisations towards enhancing their effectiveness).