NON-RESIDENT ORDINARY RUPEE (NRO) ACCOUNT SCHEME
Treatment of loans/ overdrafts in the event of change in the resident status of the borrower
In case of person who had availed of loan or overdraft facilities while resident in India and who subsequently becomes a person resident outside India, the authorized dealer/ bank may at their discretion and commercial judgment allow continuance of loan/ overdraft facilities. In such cases, payment of interest and repayment of loan may be made by inward remittance or out of legitimate resources in India of the prson concerned.
Payment of funds to Non-resident/ Resident Nominee
The amount of due/payable to non-resident nominee from the NRO account of a deceased account holder shall be credited to NRO account of the nominee with an authorized dealer/ bank in India. The amount payable to resident nominee from the NRO account of a deceased account holder shall be credited to resident account of the nominee with a bank in India.
Transfer of Funds from Non-Resident Ordinary (NRO) account to Non-Resident External (NRE) Account
Reserve Bank has decided that henceforth NRI as defined in Foreign Exchange Management (Deposit) Regulations, 2000 contained in Notification No.FEMA.5/2000-RB dated 3rd May 2000 as amended from time to time, shall be eligible to transfer funds from NRO account to NRE account within the overall ceiling of USD one million per financial year subject to payment of tax, as applicable (i.e. as applicable if funds were remitted abroad). Such credit of funds to NRE account shall be treated as eligible credit in terms of paragraph 3(j) of Schedule-1 of Notification No.FEMA.5/2000-RB dated 3rd May 2000.
Operation of NRO account by Power of Attorney holder
Powers have been delegated to the authorize dealers/ banks to allow operations on an NRO account by Power of Attorney granted in favour of a resident by the non-resident individual account holder provided such operations are restricted to
- all local payments in rupees including payments for eligible investments subject to compliance with relevant regulations made by the Reserve Bank and
- remittance outside India of current income in India of the non-resident individual account holder, net of applicable taxes. The resident Power of Attorney holder is not permitted to repatriate outside India funds held in the account other than to the non-resident individual account holder not to make payment by way of gift to a resident on behalf of the non-resident account holder or transfer funds from the account to another NRO account.
Facilities to a person going abroad for studies
Persons going abroad for studies are treated as non-resident Indians (NRIs) and are eligible for all the facilities available to NRIs. Educational and other loans availed of by them as residents in India will continue to be available to them as per FEMA regulations.
International Credit Cards
Authorized dealer banks have been permitted to issue International Credit Cards to NRIs/PIO, without prior approval of Reserve Bank. Such transactions may be settled by inward remittance or out of balances held in the card holder's FCNR/NRE/NRO accounts.
The remittances (net of applicable taxes) will be allowed to be made by the authorized dealer banks on production of an undertaking by the remitter and a Certificate from a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India in their Circular No.04/2009 dated 29th June 2009.
Statement/returns to be submitted to the Reserve Bank
ANNEXURE-1 – Statement/ returns to be submitted to the Reserve Bank.
ANNEXURE-2 – Operational Instructions for Authorized Dealer Banks.
Authorized Dealers may carefully study the provisions of the Act/ Regulations/ Notifications issued under Foreign Exchange Management Act, 1999. Reserve Bank will not prescribe the documents which should be verified by the authorized dealers while permitting remittances for various transactions. In terms of the provisions contained in sub-section 3 of section 10 of the Act, before undertaking any transaction in foreign exchange on behalf of any person authorized dealer is required to obtain a declaration and such other information from the person (applicant) on whose behalf the transaction is being undertaken that will reasonably satisfy him that the transaction is not designed to contravene or evade the provisions of the Act or any of the Rules or Regulations made or Notifications or directions or orders issued under the Act. Authorized dealers should be preserve the information/ documents obtained by them from the applicant before undertaking the transactions for verification by the Reserve Bank. In case the person on whose behalf the transaction is being undertaken refuses or does not satisfactory compliance of the requirements of an authorized person, he shall refuse in writing to undertake the transactions. Where an authorized person has reasons to believe that a contravention or evasion of the Act or the Rules or Regulations made or Notifications issued thereunder was contemplated in the transaction that he has refused to undertake, he shall report the matter to the Reserve Bank. With a view to maintaining uniform practices, authorized dealers may consider requirements or documents to be obtained by their branches to ensure compliance with provisions of sub-section (5) of section 10 of the Act.
- Opening of accounts by Bangladesh/ Pakistan entitites.
Opening of accounts by individuals/ entities of Bangladesh/ Pakistan nationality/ ownership requires prior approval of Reserve Bank. All such requests may referred to the Chief General Manager, Foreign Exchange Department (Foreign Investment Division), Reserve Bank of India, Central Office, Mumbai-400 001.
- Remittance of current income.
Remittance outside India of current income like rent, dividend, pension, interest, etc. in India of the account holder is a permitted debit to the NRO account. Authorized Dealers may allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.
- The remittance facility in respect of sale proceeds of immovable property is not available to citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan.
- The facility of remittance of sale proceeds of other financial assets is not available to citizens of Pakistan, Bangladesh, Nepal and Bhutan.
Authorized dealers can allow remittances to non-residents only on production of an undertaking by the remitter and a Certificate from a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes, Ministry of Finance, Government of India in their Circular No.04/2009 dated 29th June 2009.