NRO Account
A Non-Resident Ordinary (NRO) Account is a rupee-denominated bank account opened by Non-Resident Indians (NRIs) to manage Indian-source income — such as rent, dividends, pension, sale proceeds of Indian property, or refunds.
Understanding NRO Account
NRO accounts are mandatory for NRIs who continue to receive income from Indian sources after leaving India — rental income from a flat in India, dividend income from Indian shares held before becoming NRI, pension from an Indian government job, etc. Resident savings accounts must be converted to NRO upon NRI status change.
The 30% TDS on NRO interest is the headline tax pain point. NRIs in countries with a Double Taxation Avoidance Agreement (DTAA) with India can claim lower TDS rates by filing Form 10F annually with their Indian bank.
Why it matters
NRO is non-optional for NRIs with continuing Indian income. The 30% TDS is high but DTAA benefits can reduce it to 10–15% for residents of US, UK, UAE, Singapore. Always verify DTAA applicability and file Form 10F with your Indian bank to optimise — the difference between 30% and 15% on rental income is substantial.
Example
An NRI in the US owns a Delhi rental property earning ₹40,000/month rent. The rent must be deposited into the NRO account (not NRE). Annual rent: ₹4.8 lakh, less standard 30% repair deduction = ₹3.36 lakh taxable income. TDS at 30% = ₹1.01 lakh. The NRI files an Indian tax return claiming any DTAA benefits and may receive a refund based on actual tax liability.
An NRI in the US owns a Delhi rental property earning ₹40,000/month rent. The rent must be deposited into the NRO account (not NRE). Annual rent: ₹4.8 lakh, less standard 30% repair deduction = ₹3.36 lakh taxable income. TDS at 30% = ₹1.01 lakh. The NRI files an Indian tax return claiming any DTAA benefits and may receive a refund based on actual tax liability.