A lot of people hold non-resident ordinary (NRO) accounts, and it is a vital thing to know, how the tax treatment is accorded to these NRO accounts. There are lot of choices for the NRO accounts, and account holders need to know the tax consequences for every type of NRO account.
Following are the top three things to keep in mind for the NRO account holders:
Choice: NRO account gives choices for individuals. In case, account holders just want to deposit and withdraw money, there is the choice of current as well as savings account. The individuals who transact heavily, generally go for a savings NRO account. The advantage of the savings NRO account over the current NRO account, is that holders get interest rate on their holdings in savings NRO account.
Taxation: The account holders have to pay taxes on the interest earned on the NRO accounts. However, the non-residents can make use of the basic exemption limit, which is currently at Rs 2.5 lakh, for the purpose of calculation of their total tax liability.
Tax deduction: There is a rule for the NRO accounts that the tax deducted would be at source for the income earned. The tax deduction rate is 30.9%, which is quite high, but may differ for different banks.