NRO and savings accounts are not the same thing

An NRO account (Non-Resident Ordinary account) and a regular savings account are both held at banks, but they exist for different people in different situations. A savings account is for residents of India who live and work there. An NRO account is for Non-Resident Indians (NRIs)—people who hold Indian citizenship but live and work outside India. The rules about who can open each one, what money can go in, and what you can do with the money are completely different.

If you're an NRI trying to manage money in India, or a resident wondering whether you need an NRO account, the distinction matters because using the wrong account type can create tax problems, freeze your money, or force you to move accounts later. This guide explains what each account does, who can open one, and how to know which one you need.

Key Takeaways

  • A savings account is for Indian residents; an NRO account is for Non-Resident Indians who need to hold and manage rupees earned in India.
  • NRO accounts can only receive money earned in India (salary, rent, pension), while savings accounts accept money from anywhere.
  • Money in an NRO account can be spent inside India but cannot be freely moved out of the country without following specific rules.
  • If you move abroad after opening a savings account, you must convert it to an NRO account or close it; you cannot keep a savings account as a non-resident.
  • Tax filing and reporting requirements are stricter for NRO accounts because the Reserve Bank of India tracks foreign income and outflows.

Who can open each account type

A savings account requires you to be an Indian resident. "Resident" has a specific meaning under Indian tax law: you must have been in India for at least 182 days in the financial year, or you must have been in India for at least 60 days in the current year and 365 days in the four years before that. If you meet either test, you can open a savings account at any bank.

An NRO account is for people who do not meet the resident test—typically Indians living abroad on work visas, permanent residency, or citizenship in another country. You do not need to be an Indian citizen to open an NRO account; you just need to have been a resident of India at some point and now live outside India. Most banks will ask for proof of non-resident status, such as a visa, work permit, or passport showing your current country of residence.

The moment you stop being a resident (by moving abroad and staying there), your savings account status changes. You cannot simply keep a savings account as a non-resident. Your bank will either ask you to convert it to an NRO account or close it within a set period, usually 90 days to six months depending on the bank.

What money can go into each account

A savings account can receive money from anywhere: salary from an Indian employer, money transferred from abroad, inheritance, rental income, investment returns, or personal transfers from family. There are no restrictions on the source or the currency of the money, as long as it enters India legally.

An NRO account has strict rules about what money can enter it. The account can only receive money that was earned in India: salary from an Indian employer, rent from property you own in India, pension payments from an Indian employer or government scheme, or interest and dividends from Indian investments. Money you earned abroad and want to send to India cannot go into an NRO account; it must go into an NRE account (Non-Resident External account) instead, which is a separate account type designed for foreign-earned income.

This distinction matters because if you deposit foreign-earned money into an NRO account, the bank may flag it, freeze the account, or ask you to move the money. The Reserve Bank of India monitors NRO accounts specifically to ensure they only hold rupees earned in India.

How you can use the money in each account

Money in a savings account can be used freely. You can withdraw it, transfer it abroad, spend it on anything, or move it to another account without restriction. There is no limit on how much you can withdraw or transfer out of India in a single transaction or over time.

Money in an NRO account can be spent freely inside India—you can withdraw it, pay bills, buy things, or transfer it to other Indian accounts. However, moving money out of India from an NRO account is restricted. You can transfer up to $1 million USD per financial year out of India from an NRO account under the Liberalised Remittance Scheme (LRS), but you must follow the process: you need to file a declaration with your bank, provide proof of the purpose (such as education, medical treatment, or travel), and the bank will convert the rupees to foreign currency and send the money abroad.

If you want to move more than $1 million USD out of India, or if your purpose does not fit the LRS categories, you will need to seek approval from the Reserve Bank of India, which can take weeks or months. This is why many NRIs open both an NRO account (for India-earned money) and an NRE account (for foreign-earned money that can move more freely).

Tax reporting and compliance differences

Residents with savings accounts file income tax returns in India on their worldwide income. If you earn money abroad, you must report it on your Indian tax return. However, India has tax treaties with many countries to avoid double taxation, so you may not owe tax on the same income twice.

Non-residents with NRO accounts have different tax obligations. You only pay tax in India on money earned in India (the money in your NRO account). Money you earn abroad is not taxed in India, but you must report the NRO account itself on your tax return and declare any interest earned in the account. The bank will also send you a Form 26AS (tax credit statement) showing all interest paid, which you must include in your return.

The Reserve Bank of India requires banks to report NRO account details to tax authorities, so there is less room for error or omission. If you fail to report an NRO account or the income it generates, the tax authority can impose penalties and interest on unpaid tax.

Interest rates and fees

Interest rates on savings accounts and NRO accounts are set by each bank and vary. Most banks offer the same interest rate on both account types—typically between 3% and 4.5% per year, though this changes based on Reserve Bank policy. Some banks offer slightly lower rates on NRO accounts because they involve more regulatory oversight, but the difference is usually small (0.25% to 0.5%).

Fees also vary by bank. Both account types may charge monthly maintenance fees if the balance falls below a minimum (often ₹10,000 to ₹25,000), fees for international transfers, or fees for converting currency. NRO accounts sometimes have higher fees because outbound transfers require more paperwork and compliance checks. Before opening either account, ask the bank for a fee schedule so you know what to expect.

Converting or closing accounts when your status changes

If you are a resident with a savings account and you move abroad, you must convert the account to an NRO account within 90 days to six months (the exact deadline depends on your bank). To convert, contact your bank with proof of non-resident status: a copy of your visa, work permit, or passport showing your current address abroad. The bank will change the account type, and the rules will shift—money you earn abroad can no longer go into this account, and you will be subject to the outbound transfer limits.

If you are an NRI with an NRO account and you move back to India and become a resident again, you can convert the NRO account back to a savings account. You will need to provide proof of resident status (such as a lease agreement, utility bill, or visa stamp showing your return date). After conversion, the account will have no restrictions on inbound or outbound transfers.

If you do not convert when your status changes, the bank may freeze the account or close it, which can lock you out of your money temporarily. It is better to contact your bank as soon as you know your status is changing rather than wait for the bank to act.

Frequently Asked Questions

Can I have both a savings account and an NRO account at the same time?

No. If you are a resident, you can only have a savings account. If you are a non-resident, you can have an NRO account, but not a savings account. However, as a non-resident, you can have both an NRO account (for India-earned money) and an NRE account (for foreign-earned money) at the same bank or different banks.

What happens if I deposit foreign-earned money into my NRO account by mistake?

The bank may flag the deposit and ask you to move it to an NRE account instead. If you do not move it within a set period, the bank may freeze the account or reverse the transfer. Contact your bank immediately if this happens and ask them to help you move the money to the correct account type.

Do I need an NRO account if I am an NRI but do not earn money in India?

No. If you do not have income in India, you do not need an NRO account. You can use an NRE account to hold foreign-earned money, or you can simply not maintain an account in India. However, if you own property in India or receive a pension from an Indian employer, you will need an NRO account to receive that income.

Can I withdraw all the money from my NRO account and move it abroad?

You can withdraw up to $1 million USD per financial year under the Liberalised Remittance Scheme. If your balance is higher than that, you can move the excess only if you have a specific purpose (education, medical treatment, or travel) and the Reserve Bank approves it. Money you spend inside India does not count against the limit.

What if my bank does not offer NRO accounts?

Most large banks in India offer NRO accounts, but some smaller or regional banks may not. If your current bank does not offer NRO accounts, you will need to open an account at a different bank that does. You can keep your savings account open at your current bank while opening an NRO account elsewhere, but once you become a non-resident, you must convert or close the savings account.