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Different Types Of NRO Accounts

Many people living in India send their children abroad for a brighter future. Some settle there, whereas some return to the country. Those who decide to stay overseas try to make their careers in those countries only. They have the responsibility and duty of sending money to their parents living in India. They send it in their local currency, which converts into the Indian Rupee upon reaching India.

Non-Resident Ordinary Saving Bank Accounts (NRO accounts) is for NRIs to manage/invest their Indian earnings without repatriating to the country. The funds are repatriable only if they follow specific rules and limits set by the Reserve Bank of India (RBI). It is an ordinary saving bank account opened for NRIs that supports all regular transactions in India, including making payments, shopping, receiving earnings such as rent, pension, etc.

What are the types of accounts?

An NRO bank account consists of two types of accounts:

  • The NRO PIS Account: It is an NRO Saving Bank Account with PIS Permission. Initially, it was compulsory for all investors investing in the Indian Stock Market on a non-repatriation basis. However, after the relaxation of the rules, PIS permission is not mandatory anymore. NRIs can also invest in equity stocks using this account. Many brokers still prefer those with PIS permission to avoid complex TDS computation and deduction.

  • The NRO Non-PIS Account: These are regular accounts without any PIS permission and are mandatory for NRIs to invest in equity derivatives (F&O) in India. It also manages their earnings (i.e. Rent, Pension) and expenses in India. The RBI does not control transactions made under this account.

To understand what is NRO account, all users must know the types of options available such as current account, savings account, recurring deposit account, fixed deposit account, etc. Following are the benefits it offers:

  • Safeguarding earnings – 

Non-resident individuals can have domestic earning sources such as property on rent, dividend income from stock market investments, etc. The deposit of such funds to financial institutions is possible only through this account.

  • Increased credit availability – 

An NRI can opt for loans against NRO fixed deposit to meet any emergency expenses arising either in India or in the respective country of residence. The rate of interest is also lower than unsecured loans.

  • Multiple account holders – 

At least two or more individuals can open a joint account, where one individual has to be an NRI/PIO/OCI. The other account holder can also be Indian. If both the applicants reside abroad, they can also choose an individual living in the country to have the “power of attorney” for operating it domestically.

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