What is NRO Account Explained: Benefits, Rules, Pitfalls

Q: What are common mistakes to avoid with an NRO account?

Non-compliance with FEMA rules: Ensure all transactions are within permissible limits. Exceeding repatriation limits: Track your annual repatriation to avoid penalties. Ignoring DTAA benefits: Failing to claim tax relief can lead to unnecessary tax burdens. Solution: Bajaj Finserv’s tools help you avoid these pitfalls by providing clear guidance and automated alerts.

Managing finances in India while living abroad can be a challenging task for Non-Resident Indians (NRIs). From navigating complex tax regulations to ensuring compliance with foreign exchange rules, staying on top of financial obligations can feel overwhelming. This is where an NRO (Non-Resident Ordinary) account proves invaluable. Designed specifically for NRIs, an NRO account allows you to manage income earned in India, such as rent, dividends, or pensions, while ensuring regulatory compliance.

In this comprehensive guide, we will explore the details of NRO accounts, how they differ from other types of accounts, and the regulatory framework surrounding them. Additionally, we will discuss how Bajaj Finserv’s NRO account management tools can simplify financial operations for NRIs.

Published Sep 8, 2025 4 Min Read

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What Is an NRO Account and Who Is Eligible?

An NRO account is a type of bank account designed for NRIs to manage income earned in India. This income could include rent from property, dividends from investments, pensions, or any other earnings within India. The funds in an NRO account are maintained in Indian currency (Rs.) and can be used for local expenses, investments, or remittances.

Eligibility for an NRO Account

NRIs: Indian citizens residing abroad for employment, business, or other purposes.
PIOs (Persons of Indian Origin): Individuals of Indian ancestry but holding foreign citizenship.
OCIs (Overseas Citizens of India): Foreign nationals of Indian origin holding OCI cards.

How Bajaj Finserv Helps

Bajaj Finserv offers smart tools to streamline the management of your NRO account. From secure online access to seamless documentation processes, you can manage your account anytime, anywhere. For example, you can log in securely using an OTP to view account details or download income tax documentation quickly.

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NRO vs NRE vs FCNR: Which Suits You Best?

Choosing the right account type depends on your financial goals, income sources, and repatriation needs. Below is a detailed comparison of NRO, NRE (Non-Resident External), and FCNR (Foreign Currency Non-Resident) accounts:

Feature	NRO Account	NRE Account	FCNR Account
Currency	Indian Rupees (Rs.)	Indian Rupees (Rs.)	Foreign currency
Purpose	Manage income earned in India	Manage income earned abroad	Save income in foreign currency
Taxation	Taxable (TDS applies)	Tax-free	Tax-free
Repatriation	Limited (up to Rs. 1 crore per financial year)	Freely repatriable	Freely repatriable
Deposit Source	Income from India	Income from abroad	Income from abroad

Which Account Should You Choose?

NRO Account: Ideal if you have income sources in India and need to manage local expenses or investments.
NRE Account: Best suited for NRIs who want to park foreign earnings in India while enjoying tax-free interest.
FCNR Account: Perfect for those looking to save in foreign currency to avoid exchange rate fluctuations.

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Regulatory & Compliance Essentials (FEMA, DTAA, RBI Rules)

Operating an NRO account requires adherence to several regulatory frameworks. Understanding these rules is essential for ensuring compliance and avoiding penalties.

FEMA Guidelines

The Foreign Exchange Management Act (FEMA) governs the operation of NRO accounts. Key points include:

NRO accounts can only hold income earned in India.
Repatriation of funds is subject to a limit of Rs. 1 crore per financial year, with proper documentation.
All transactions must comply with FEMA regulations to avoid penalties.

Pro Tip: Bajaj Finserv’s tools can help you ensure compliance with FEMA rules by simplifying documentation and offering clear guidance on permissible transactions.

DTAA Benefits

The Double Taxation Avoidance Agreement (DTAA) ensures that NRIs do not pay taxes twice—once in India and again in their country of residence.

Under DTAA, NRIs can claim tax relief on income earned in India.
Reduced TDS rates may apply, depending on the agreement between India and your country of residence.

RBI Rules

The Reserve Bank of India (RBI) regulates the operation of NRO accounts, including deposit and withdrawal rules:

Funds in an NRO account can be repatriated up to Rs. 1 crore annually, subject to documentation.
NRO accounts can hold funds in Indian currency only.

Actionable Tip: Bajaj Finserv’s NRO services simplify compliance with RBI rules by providing easy access to account statements and repatriation tools.

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Frequently Asked Questions

What are the tax benefits of an NRO account?

Income in an NRO account is subject to taxation, but you can avail of tax-saving benefits under DTAA. For instance:

Reduced TDS rates apply for countries with DTAA agreements with India.
You can claim deductions for certain types of income, such as interest on savings.

How Bajaj Finserv Helps: Use Bajaj Finserv’s tax documentation tools to streamline the process of claiming deductions and filing returns.

How does repatriation work in an NRO account?

Repatriation refers to transferring funds from your NRO account to a foreign account. Here is how it works:

Submit Form 15CA and Form 15CB to the bank.
Provide supporting documents, such as a Chartered Accountant’s certificate.
Ensure the total repatriation does not exceed Rs. 1 crore annually.

Pro Tip: Bajaj Finserv’s secure online tools make it easy to manage repatriation requests and track limits.

What are common mistakes to avoid with an NRO account?

Non-compliance with FEMA rules: Ensure all transactions are within permissible limits.
Exceeding repatriation limits: Track your annual repatriation to avoid penalties.
Ignoring DTAA benefits: Failing to claim tax relief can lead to unnecessary tax burdens.

Solution: Bajaj Finserv’s tools help you avoid these pitfalls by providing clear guidance and automated alerts.

What are the FEMA guidelines for NRO account compliance?

FEMA guidelines require NRIs to:

Use NRO accounts exclusively for income earned in India.
Maintain proper documentation for repatriation and tax compliance.

How Bajaj Finserv Helps: Bajaj Finserv offers step-by-step guidance to ensure FEMA compliance, from account setup to ongoing management.

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