NRO account after returning to India: TDS, repatriation limits, and when to convert

When you return to India, your NRO account doesn't automatically change or close. It stays open, accumulates interest, and continues operating — but under rules designed for non-residents that now apply awkwardly to someone who has become resident. Most returning NRIs don't realise the TDS hit, the repatriation cap, or the Form 15CA/15CB requirement until they try to do something with the account.

Here's what you're dealing with and what to do about it.

What an NRO account is

NRO (Non-Resident Ordinary) accounts hold Indian-source income earned by NRIs: rent from Indian property, dividends from Indian stocks, EPF withdrawals, pension, interest from Indian bonds, and any Indian income that cannot go into an NRE account.

NRO accounts are rupee-denominated. They are NOT freely repatriable (unlike NRE accounts). They attract Indian tax on interest.

Returning NRIs typically have an NRO account because:

• It held Indian rental income while they were abroad
• They had Indian investments (FDs, mutual funds) that paid income to this account
• They received EPF or gratuity payments here
• It was opened specifically for Indian income management

The three problems with an NRO account post-return

Problem 1: 30% TDS on interest

NRO account interest is subject to 30% TDS (Tax Deducted at Source), regardless of the account holder's actual tax slab.

As a returning NRI (RNOR or ROR), your marginal rate may be 20% or 30% depending on income. At 20%, you've overpaid TDS and must claim a refund in your ITR. The refund process works but takes time.

Compare: a resident savings account attracts 10% TDS on interest above ₹40,000/year (or no TDS if you file Form 15G/15H). The administrative burden of NRO's 30% TDS and subsequent refund claim is unnecessary once you're resident.

Problem 2: ₹1 crore repatriation limit

Transfers out of an NRO account to a foreign account are capped at USD 1 million per financial year (approximately ₹83 crore at current rates), net of taxes.

For most returning NRIs, this limit is academic — you're bringing money into India, not sending it out. But if you:

• Inherited Indian property and want to send the proceeds abroad
• Have large Indian FD balances from NRI years that you want to repatriate
• Sold Indian stocks and want to move proceeds to your US brokerage

...then this cap and the accompanying Form 15CA/15CB requirement applies.

Problem 3: Form 15CA/15CB for foreign transfers

Any foreign remittance above ₹5 lakh from an NRO account requires:

• Form 15CA: filed online on the Income Tax portal (incometax.gov.in) before the transfer
• Form 15CB: certificate from a CA confirming applicable taxes have been paid

The CA charges ₹3,000–10,000 for Form 15CB. Each remittance needs a fresh certificate. For occasional large transfers, this is manageable. For regular or small transfers, it's disproportionate overhead.

Converting NRO to resident savings account

When to do it: within 30 days of FEMA residential status change — same timeline as NRE → RFC conversion.

Process:

1. Visit your bank branch (usually cannot be done online for account redesignation)
2. Submit: passport copy (showing India address or recent visa), Aadhaar copy, address proof (utility bill, Aadhaar)
3. Fill the bank's FEMA residential status change form
4. Submit signed declaration confirming you are now a FEMA resident

What changes after conversion:

• TDS on interest: 30% → 10% (or nil with Form 15G/15H)
• Account type designation: NRO → resident savings
• Repatriation rules: NRO limits → LRS route (₹25 lakh/year for investments)
• Form 15CA/15CB: not required for domestic transactions; LRS remittances have separate documentation

What stays the same:

• Account number
• Existing balance
• Linked fixed deposits (they run to maturity at the NRO FD rate, then renew at resident rates)

Should you keep a small NRO balance?

One legitimate reason to keep an NRO account (even after return): if you still receive Indian income from sources that prefer NRO routing — some older mutual fund accounts, property rentals paid by tenants directly, pension payments.

In practice, these can all be redirected to a resident savings account. There is no requirement to have an NRO account as a resident. Convert and redirect.

NRO fixed deposits: what happens at maturity

If you have NRO FDs that haven't matured, you have two choices:

Option A: Let them run to maturity The FD earns the agreed NRO rate until maturity. At maturity, either convert to a resident FD (at lower current rates) or move the balance to your resident savings account.

Option B: Break the FD early Pre-mature withdrawal incurs a penalty (typically 0.5–1% below the contracted rate). Calculate whether the tax saving from converting to resident rates early (lower TDS) exceeds the penalty — it rarely does unless you have a very long-dated NRO FD at high rates.

The repatriation scenario: sending NRO money abroad

If you genuinely need to send NRO balances abroad (liquidating Indian assets, sending inherited funds, sending proceeds from property sale):

Step 1: Ensure all Indian taxes are paid on the income/gains (advance tax, ITR filed and assessed)

Step 2: Get CA-issued Form 15CB certifying the tax status of the funds

Step 3: File Form 15CA online (references the 15CB certificate number)

Step 4: Submit 15CA + 15CB to your bank along with the remittance request

Step 5: Bank processes the SWIFT transfer to your foreign account

Limit: USD 1 million per FY. Multiple transactions are allowed within this limit.

TCS on NRO repatriation: outward LRS remittances attract 20% TCS above ₹7 lakh. NRO repatriation under the ₹1 crore cap is treated differently from LRS — consult your bank on whether TCS applies to your specific transaction.

Quick action checklist

Related: RFC account for returning NRIs: complete guide · RBI's rules on foreign income for Indian residents · The returning NRI master guide