The NRO Account Handbook: Permissible Credits, Debits and the CA Certificate for Remittances

An NRO (Non-Resident Ordinary) rupee account is where most non-residents keep the income their Indian roots keep generating: rent, dividends, pension and the interest on legacy deposits. The account sits squarely inside the exchange-control framework, governed by RBI Master Circular No.6/2011-12 on the Non-Resident Ordinary Rupee (NRO) Account and by the Foreign Exchange Management Act, 1999 (FEMA). Get one rule wrong and a routine transfer home can stall at the remitting bank for weeks.

This handbook sets out exactly what may be credited to an NRO account, what may be debited, how the USD 1 million per financial year remittance window works, and why no bank will wire money abroad until it holds a Chartered Accountant certificate — a requirement that traces back to CBDT Circular 10/2002. Every figure below is drawn from the governing circular or statute; where a number cannot be sourced, it has been left out.

FEMA / DTAA Position

Under Section 2 of FEMA, 1999, any person resident outside India may open, hold and maintain an NRO account with an authorised dealer bank in India. RBI Master Circular No.6/2011-12 confirms that existing resident accounts are simply redesignated as NRO on the holder's change of status, so the account travels with you when you move abroad. The one carve-out is nationality-based: citizens of Bangladesh and Pakistan need prior approval of the Reserve Bank of India before an NRO account can be opened.

The account is a rupee-denominated, non-repatriable-by-default vehicle. That default matters because it separates the NRO from its two cousins: the NRE (Non-Resident External) account and the FCNR (Foreign Currency Non-Resident) deposit, both of which are freely repatriable by design. A useful starting point is our NRO account glossary entry and the companion NRE account explainer.

Where does a Double Taxation Avoidance Agreement (DTAA) come in? A DTAA does not decide whether income is credited to your NRO account — Indian domestic law does that — but it caps the rate at which India may withhold tax when that income is paid to a resident of a treaty partner. Section 195 of the Income Tax Act, 1961 requires the payer to deduct tax at the rates in force or the applicable DTAA rate, whichever is lower. Crucially, none of India's treaties treats capital gains on Indian assets as "exempt": India retains the right to tax long-term capital gains at 12.5% under every major treaty. Our DTAA glossary entry unpacks the mechanics.

Permissible credits and debits

RBI Master Circular No.6/2011-12 lists what may lawfully flow through the account. The table below summarises the core positions.

The gift entry is the one most people miss: under RBI Master Circular No.6/2011-12, a resident individual may make a rupee gift to a non-resident close relative (as defined for company-law purposes) by crossed cheque or electronic transfer into that relative's NRO account, subject to the Liberalised Remittance Scheme limits that apply to the resident donor.

Tax Treatment in India

An NRO account is fully within the Indian tax net. This is the single largest difference between it and an NRE or FCNR account. Interest earned on an NRO savings balance or NRO fixed deposit is taxable in India in the year it accrues, and the bank must deduct tax at source before crediting it.

For a non-resident, that deduction runs under Section 195 of the Income Tax Act, 1961, not the resident TDS provisions. The statutory rate on NRO interest is 30%, and to that base the bank adds the applicable surcharge and a health and education cess of 4%. The surcharge is slab-linked to total income, as set out below.

Note the ceiling: even for income above Rs 5 crore, the surcharge in the new tax regime is capped at 25% — the older 37% band does not apply under the new regime. Our surcharge glossary entry has worked examples, and you can model your own liability with the NRI income tax calculator.

Where the income is rent from Indian property, the tenant deducting tax must apply Section 195 rather than the 194-I resident rate, and the net rental income is taxable at slab rates after the standard 30% statutory deduction on annual value. Because the withholding is on the gross rent, most NRI landlords over-pay through the year and claim a refund on filing. The NRI rental income tax calculator shows the gap between tax withheld and tax actually due.

The DTAA can lower the withholding materially. Section 195 allows the payer to apply the lower of the domestic rate and the treaty rate once the account holder furnishes a Tax Residency Certificate and Form 10F. The table below shows the DTAA interest rate for three common corridors against the 30% domestic rate.

For a UAE-resident NRI, invoking the India-UAE treaty (effective from 22 September 1993) more than halves the withholding on NRO interest, from 30% to 12.5%. Read the TDS glossary entry for how to file for the lower rate.

Tax Treatment Abroad

Once India has taxed your NRO income, the country where you actually live gets its turn — and this is where the foreign tax credit prevents the same rupee being taxed twice. The mechanism is symmetrical to India's Section 90 relief: the treaty partner allows a credit for the Indian tax already paid, up to the amount of its own tax on that income.

For a US-resident NRI, Article 24 of the India-US treaty (effective from 12 September 1991) grants a foreign tax credit in the country of residence. If India withholds 15% on NRO interest under the treaty and the US marginal rate on that interest is higher, the NRI pays the US the difference and offsets the Indian 15% already deducted. The same logic runs for dividends, though note that portfolio dividends carry a 25% treaty rate under Article 10 of the India-US treaty, reduced to 15% only where the recipient holds at least 10% of the voting stock.

The United Arab Emirates is the instructive exception. Because the UAE levies no personal income tax, there is no foreign tax against which to credit the Indian deduction — the India-UAE treaty rate simply becomes the final cost. This is why securing the treaty rate of 12.5% on interest, rather than the 30% domestic rate, matters far more for a Dubai-based NRI than for a London-based one who can recover the Indian tax through UK credit. To claim UAE treaty benefits, the notes to the India-UAE DTAA require a Tax Residency Certificate supported by proof of a UAE establishment.

A recurring error is treating capital gains as treaty-exempt. Even for the UAE, the DTAA notes confirm that capital gains on shares of an Indian company remain taxable in India, and the long-term rate India retains is 12.5% across the US, UK and UAE treaties alike. No major treaty makes NRO-routed capital gains exempt in India.

Repatriation Mechanics

Repatriation is where the NRO account's non-repatriable default and its escape valves meet. There are two distinct pipelines, and conflating them is the commonest cause of a blocked transfer.

First, current income — rent, dividends, pension and interest — is freely repatriable from an NRO account after tax, without counting against any dollar ceiling. Second, capital and balances — the proceeds of selling a flat, redeeming shares, or drawing down accumulated deposits — may be remitted only up to USD 1 million per financial year (April to March), as set out in RBI Master Circular No.6/2011-12 for the remittance of assets.

Before any bank executes an outward remittance, it needs two documents. The first is Form 15CA, an online declaration filed by the remitter on the income-tax portal. The second is Form 15CB, a certificate signed by a Chartered Accountant confirming the nature of the payment and that the correct tax has been deducted. This CA-certificate requirement originates in CBDT Circular 10/2002, and the current framework is codified in Rule 37BB of the Income-tax Rules. Our Form 15CA / 15CB glossary entry walks through both forms field by field.

The table below contrasts the three non-resident accounts on the repatriation dimension.

Two practical notes. NRO funds may be moved into an NRE account, but only within the same USD 1 million annual window and only after the 15CA/15CB documentation is complete — the transfer is treated as a repatriation event, not an internal shuffle. And where the source is the sale of inherited property, the same USD 1 million ceiling and CA certificate apply. Model the after-tax proceeds first with the NRI repatriation calculator and confirm your residential status before you file, because the account's tax character follows your FEMA status, not your citizenship.

For the mechanics of a specific sale, see our recent explainers on selling Indian property and repatriating proceeds and on repatriation versus non-repatriation basis for share investments.

FAQ

Who is eligible to open an NRO account?

Under Section 2 of FEMA, 1999, any person resident outside India may open an NRO account, and a former resident's rupee accounts are redesignated as NRO on change of status. The sole restriction in RBI Master Circular No.6/2011-12 is that nationals of Bangladesh and Pakistan require prior Reserve Bank of India approval.

How much can I remit abroad from my NRO account each year?

Current income such as rent, dividends and interest is freely repatriable after tax with no ceiling. Capital and account balances — sale proceeds, deposit redemptions — are capped at USD 1 million per financial year (April to March) under RBI Master Circular No.6/2011-12.

Why does my bank insist on a CA certificate?

Because CBDT Circular 10/2002 and Rule 37BB of the Income-tax Rules require it. The remitter files Form 15CA online, and a Chartered Accountant issues Form 15CB certifying the payment's nature and that tax has been correctly deducted before the bank releases funds abroad.

What tax is deducted on NRO interest?

NRO interest is taxable in India. Under Section 195 of the Income Tax Act, 1961 the base withholding is 30%, plus the applicable surcharge (10% to 25% by income band) and a 4% health and education cess. A DTAA can reduce this — to 15% for US and UK residents and 12.5% for UAE residents.

Can a resident relative put money into my NRO account?

Yes. RBI Master Circular No.6/2011-12 permits a resident individual to gift rupees to a non-resident close relative by crossed cheque or electronic transfer into the NRO account, within the resident donor's Liberalised Remittance Scheme limits.

Will I be taxed twice on the same NRO income?

Not if a DTAA applies. Under provisions such as Article 24 of the India-US treaty (effective 12 September 1991), your country of residence grants a foreign tax credit for the Indian tax already deducted, up to its own tax on that income. In a no-tax jurisdiction like the UAE, the Indian treaty rate of 12.5% on interest becomes the final cost.

Is capital gain on Indian assets exempt under any DTAA?

No. India retains the right to tax long-term capital gains at 12.5% under the US, UK and UAE treaties alike. The India-UAE DTAA notes explicitly confirm that gains on shares of an Indian company remain taxable in India, so no NRO-routed capital gain is treaty-exempt.