What You Need to Know About NRO Account Taxation
Alex RodriguezWhat You Need to Know About NRO Account Taxation
If you are a non-resident Indian looking to invest in India, it is essential to understand thetaxation rulesthat apply to your Non-Resident Ordinary (NRO) account. Here is what you need to know about NRO account taxation.
What is an NRO account?
An NRO account is a bank account opened by a non-resident Indian in India. It can be a savings, current, or fixed deposit account. The funds in an NRO account come from an individual's Indian income sources such as rent, pension, or dividends.
Taxation on NRO account interest
The interest earned on an NRO account is taxable in India. The tax rate is 30% plus surcharge and cess. The bank deducts TDS (Tax Deducted at Source) at a rate of 30% on the interest earned on an NRO account. The TDS can be claimed as a tax credit in the individual's country of residence.
Taxation on NRO account balances
The balance in an NRO account is not taxable. However, if the balance in an NRO account exceeds INR 5 million (approximately USD 67,000), the individual is required to file an income tax return in India. The income tax return must include details of all income earned in India, including the interest earned on the NRO account.
Repatriation of funds from an NRO account
An NRI can repatriate up to USD 1 million per financial year from their NRO account. The funds can be repatriated for any purpose, including investments, education, or medical treatment. However, before repatriation, the individual must obtain a certificate from a chartered accountant certifying that all taxes have been paid.
Investing in India through an NRO account
An NRO account can be used to invest in India through the Portfolio Investment Scheme (PIS). The PIS allows NRIs to invest in shares and convertible debentures of Indian companies listed on recognized stock exchanges in India. The investment limit is 5% of the paid-up capital of the Indian company.
Conclusion
In conclusion, an NRO account is a useful tool for NRIs to manage their Indian income sources and invest in India. However, it is essential to understand the taxation rules that apply to an NRO account. The interest earned on an NRO account is taxable in India, and the balance in an NRO account is not taxable but may require an income tax return if it exceeds INR 5 million. NRIs can also invest in India through their NRO account using the PIS.
Article review