What is an NRO account?
Non-Resident Ordinary Rupee Account for NRIs to manage Indian-source income — rent, dividends, pensions, sale proceeds. Unlike NRE, NRO is partially restricted for repatriation and is taxable in India.
India tax on NRO interest
Indian banks deduct TDS at 30% + surcharge + cess (~31.2%). Higher Indian tax bracket → pay difference at filing. Lower-bracket NRIs claim refund via ITR.
DTAA can reduce TDS to 15% with a Tax Residency Certificate (TRC) and Form 10F.
US tax on NRO interest
For US tax residents: fully taxable as ordinary income on Schedule B, Form 1040.
Conversion: USD value at year-end exchange rate, or transaction-by-transaction using daily rates.
Foreign Tax Credit on NRO interest
Indian TDS (31.2% no DTAA / 15% with DTAA) is creditable against US tax via Form 1116. US federal tax on interest up to 37%, FTC usually offsets most or all.
Unused FTC carries back 1 year or forward 10 years.
FBAR and Form 8938
NRO accounts MUST be reported on FBAR if the aggregate foreign balance exceeded $10K at any time. Form 8938 if above $50K-$75K thresholds.
Common NRO mistakes
- Not reporting NRO interest on Schedule B
- Wrong exchange rate conversion
- Missing TDS claim on Form 1116
- Forgetting NRO in FBAR aggregation
- Confusing NRO with NRE
Repatriation rules
Up to USD 1 million per FY can be repatriated from NRO, subject to:
- Form 15CA (self-declaration) and Form 15CB (CA certificate)
- Taxes fully paid in India
- Submitted to the bank
Repatriation itself is not a taxable event, but requires documentation.
When to switch NRO to a resident account?
When becoming an Indian tax resident again (post-return, ROR). NRO must be redesignated. Failure is FEMA violation.
CTA: Get your NRO interest reported correctly
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.