12 June 2022 7:02

Tax implications of freelance income in NRO account for a U.S. H4 EAD holder

Is income in NRO account taxable?

Interest earned on NRO account is subject to tax deduction at source at 30%. However, there is no TDS on interest from a savings account. But please note that both these incomes are fully taxable. Income from NRO account is added to income from other sources in the ITR of the taxpayer.

What is taxable in NRO account?

Taxation. An NRO account is taxed at 30% of the total income accrued in India, as per the Income Tax Act of 1961. Additionally, a cess at 3% is applicable to the overall tax liability. Interest earned through such accounts is also taxable.

Is foreign income taxable for freelancers?

Your foreign income will need to be treated in the same way as your local income. So, if you’ve been entering local earnings under the salary head, your foreign income too would need to be entered under this head. You can still avail the minimum exemption of Rs 2,50,000 on your total income.

Is interest on NRO account exempt?

As far as taxation is concerned, interest earned on an NRE account is fully exempt under Section 10. However, interest credited on NRO account is fully taxable in India and the banks are required to deduct tax at source on the interest credited on all NRO bank account including a saving bank account.

Is NRO account taxable in us?

Interest earned on NRE Account or NRO Account is Taxable in the U.S. including NRE FD, NRO FD interest. You have to add all your income from India to your US income and pay taxes if you are a Green Card holder, PIO, OCI, or legal resident (working on H1B, L1B, H4 EAD, or any other work visa in the USA).

Is TDS deducted on NRO account?

TDS will be deducted on the interest earned from NRO account @30% plus applicable cess and surcharge. The TDS rate is 31.2% on interest upto Rs 5 million. The entire NRO interest is subject to TDS without any exempted threshold.

How can I avoid tax on my NRO account?

By investing in mutual funds, especially if the amount is a large sum of money, NRI’s may be entirely exempted from TDS or may have to pay it at a rate which is much reduced. As a result, the savings they make from income earned on Indian soil will be far more than usual.

Can US citizen have NRO account?

While NRE Account and FCNR(B) Account may be opened only by NRIs and PIOs, NRO Account may be opened by all non-resident (including foreign nationals) for carrying out bona fide rupee transactions. Foreign nationals coming to India for employment or as a tourist may open a NRO Account.

How much cash can be deposited in NRO account?

Not repatriable except for all current income. Balances in an NRO account of NRIs/ PIOs are remittable up to USD 1 (one) million per financial year (April-March) along with their other eligible assets.

What is the advantage of NRO account?

Benefits of NRO account

You can deposit these securely in an NRO account and use the funds to manage your rupee expenses. Invest with ease: An NRO account makes it easy for you to invest in mutual funds and Indian bonds. Get loans: You can use NRO fixed deposits as collaterals against loans.

Which is taxable NRE or NRO?

The difference between NRE & NRO accounts

NRE accounts are exempt from tax. Neither the balance, nor the interest earned on these accounts is taxable. The interest earned on an NRO account is however taxable at 30% according to the Income Tax Act 1961.

Is money in NRO account Repatriable?

Balances in the NRO account are not freely repatriable. But the RBI does allow NRIs to remit up to USD 1 million per financial year from the NRO account, provided you follow certain procedure.

What is the maximum amount that can be repatriated from NRO account?

USD 1 million

Authorised Dealers can allow remittance/s upto USD 1 million, of balances in NRO accounts/of sale proceeds of assets on production of an undertaking by the remitter togetherwith a certificate issued by a Chartered Accountant in Annexure A and B as prescribed by the Central Board of Direct axes (CBDT).

Can I withdraw money from NRO account in India?

This account allows you to receive funds in either Indian or foreign currency. However, only Indian currency can be withdrawn as NRO Accounts are kept in Indian currency and cannot be freely repatriated into any foreign currency.

Can I transfer money from NRO account?

Yes, you can transfer funds from an NRO account to an NRE or Non-Resident External account. The Reserve Bank of India allows the transfer of funds up to USD 1 million a year from an NRO to an NRE account.

Is money sent to India from US taxable?

When you send money from US to India, the relationship between the sender and receiver is not important. The maximum tax-free amount you can send in a year is $14,000. Up to $14,000, no tax is charged. Beyond that amount, it would be subject to gift tax for the sender.

Should I transfer money to NRE or NRO?

While an NRE account is fully repatriable tax free, under an NRO you can still repatriate the balance but you are required to pay taxes on the repatriated amount. This crucial difference is why the NRO account is more ideal for those that want to keep their funds in the country.

Which account is better NRE or NRO?

You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.

Which bank is best for NRO account in India?

Top 10 NRO Banks in India

Bank Name Regular Interest Rates Minimum Balance
Axis Bank 2.70% – 5.50% Rs. 10,000 – Rs. 10 lakhs
Bank of Baroda 2.90% – 5.30% Rs. 1,000
Citi Bank 2.75% – 3.90% Rs. 2 lakhs
DBS Bank 3.00% – 5.00% Rs. 50,000

Is NRO account mandatory for NRI?

It is essential for an NRI to open Non-Resident External (NRE) or Non-Resident Ordinary (NRO) Account, to do any banking transactions in India. However, depending upon the transactional requirements of the NRI/PIO, he/she can decide to open either an NRE or NRO Account, or even both.

Can I have both NRE and NRO account?

Yes, an individual can open both NRE and NRO accounts to meet his needs. If you have any income arising in India, you can receive it in NRO account, and if you want to park your earnings abroad in India, you can open an NRE account.

Is NRO account taxable in India?

NRO Account Taxation

The earning received through your NRO account is taxable at 30 % plus applicable surcharge and cess. Though there is an NRO taxation implication, you can benefit from the DTAA Agreement.

Can I have 2 NRO account?

In short, sure, you can open more than one NRI account with the exclusive bank in India.

Can I move money from NRO to NRE account?

Funds from NRO account cannot be transferred to an NRE / FCNR account since funds in an NRO account cannot be repatriated outside India.

Can we deposit rupees in NRO?

Deposit / Withdrawal of Funds

Funds originating from a foreign country (foreign currency) can be deposited in both NRE and NRO accounts. However, funds originating in India i.e. in Indian Rupees or INR can be deposited only in NRO Accounts and not an NRE Account.

How many NRO accounts can be opened?

A non-resident Indian can open three types of accounts in India as authorised by the Reserve Bank of India (RBI). The money in the accounts can be in the form of a rupee or foreign currency accounts.