Is an NRO Account Taxable? What Happens to Rent Inside It

An NRO account is the rupee account where an NRI's India income must land: rent, dividends, interest, pension. The account itself is not taxed. The income flowing through it is. Understand that split and most NRO confusion disappears.

Why your rent must land in an NRO account

When you become a non-resident under FEMA, your old resident savings account is no longer the right home for your money. The rules require you to redesignate it as an NRO account. India-source income earned after that, including rent, belongs in the NRO account.

Owners take shortcuts here. The tenant pays into the owner's dormant resident account, or into a parent's account "for convenience". Both create problems. Continuing to run a resident account after becoming a non-resident is a FEMA violation. Routing rent through a relative muddies the tax trail: the department sees rent in one person's account and a property in another person's name. Years later, when you sell the flat or repatriate the money, a banker or a buyer's lawyer asks questions that have no clean answers.

The clean structure is boring and short. One NRO account in your name. Rent agreement names that account. Tenant pays into it after deducting TDS. Every property expense, from property tax to plumber, gets paid from it. The statement becomes your ledger.

What gets taxed in an NRO account

Three layers, often confused:

1. The rent itself. Rent is taxed as income from house property. Your tenant deducts TDS under Section 195 at 30% plus cess, around 31.2%, before the rent reaches the account. The deduction happens before the deposit, not inside the account. Full treatment in our guide to NRI rental income tax.

2. Interest on the NRO balance. This is the tax people mean when they say "NRO account is taxable". Interest earned on NRO savings and NRO fixed deposits is taxable in India, and the bank deducts TDS at 30% plus cess, around 31.2%, before crediting it. Compare that with NRE deposits, where interest is exempt while you remain a non-resident. The asymmetry is the design: NRO holds India-source money, NRE holds foreign earnings.

3. Nothing on the principal. Moving your own taxed money in or out of the account is not a taxable event. Tax applies to income, not to balances.

If you live in a treaty country, the TDS rate on NRO interest can drop under the DTAA. You claim it by giving the bank a Tax Residency Certificate from your country of residence, Form 10F, and a no-permanent-establishment declaration, before the interest is credited. Banks apply treaty rates from the date your papers are in order, not before.

Repatriating rent: the current-income route

Money in an NRO account is repatriable, and rent has the easiest path of all.

FEMA lets an NRI remit up to USD 1 million per financial year from an NRO account out of capital transactions: sale proceeds, inheritance, deposits. Rent does not need that allowance. Rent is current income, and current income is repatriable without a monetary cap, on one condition: tax on it has been paid or provided for. You can remit it in the year you earn it or in a later year.

The paperwork the bank will ask for:

• Form 15CA: your online declaration on the income tax portal that tax has been handled.
• Form 15CB: a chartered accountant's certificate backing that declaration, required in most rent cases.
• The rent agreement and rent receipts, so the bank can see the money is what you say it is.
• Your TDS certificates (Form 16A) from the tenant.

The Income Tax Act, 2025 renumbered many forms and sections from April 1, 2026. Ask your CA to confirm the current form designations before filing; the substance of the 15CA/15CB process carries over.

A common variant: instead of remitting abroad, you transfer from NRO to your NRE account. The documentation is the same, because an NRO-to-NRE transfer is treated like a remittance. Once in NRE, the money moves abroad at will.

Where this goes wrong

Distance lets small account decisions rot into expensive ones.

• Rent sits in a parent's resident account for years. Then the parent passes away, the account freezes, and the owner is explaining to a bank why six years of rent is inside an estate it never belonged to.
• The old resident savings account never got redesignated. A FEMA breach that surfaces at the worst time: during repatriation or sale, when the bank's compliance team reads the file.
• TDS on NRO interest comes as a surprise. The owner budgeted on the headline FD rate, and 31.2% came off the top. The refund for the excess never arrives because no return was filed.
• Repatriation stalls for missing paper. The bank wants a rent agreement that names the owner and the account. The agreement was signed by an uncle, in the uncle's name, "to keep it simple". Nothing about it is simple now.
• Receipts are scattered across relatives and WhatsApp. When the CA asks for proof of expenses and taxes paid, nobody can produce it. The 15CB takes weeks instead of days.

Every one of these is preventable with one account, one paper trail, and a return filed every year.

FAQ

Is an NRO account taxable? The income in it is. Interest on NRO balances is taxed in India with TDS at 30% plus cess. Rent deposited into it is taxed as house property income, with TDS deducted by the tenant. The principal you move in and out is not taxed.

Can my tenant pay rent into my regular savings account? No. Once you are a non-resident, India-source rent should be credited to your NRO account. Keeping a resident account running after your status changed is a FEMA violation.

What is the TDS on NRO fixed deposit interest? 30% plus 4% cess, around 31.2%, deducted by the bank. Treaty residents can get a lower rate by submitting a Tax Residency Certificate and Form 10F to the bank.

Can I send rent from my NRO account abroad? Yes. Rent is current income and is repatriable without a cap once tax is paid or provided for. The bank will ask for Form 15CA, a CA certificate in Form 15CB in most cases, the rent agreement, and TDS proof.

Does the USD 1 million limit apply to rent? No. The USD 1 million per financial year ceiling applies to capital remittances from an NRO account, such as property sale proceeds. Current income like rent sits outside it.

Is NRE interest also taxed like NRO interest? No. Interest on NRE accounts is exempt in India while you qualify as a non-resident under FEMA. That is why taxed, India-source money lives in NRO and foreign earnings live in NRE.

One account, one ledger, zero scrambling

66 MG Road routes rent to your NRO account, pays property bills from documented instructions, and maintains the receipt file that makes your CA's 15CB work a formality. Every entry itemized, every receipt at actuals. See records and reporting.

Saurabh Garg, founder, 66 MG Road

Sources

• ICICI Bank, TDS guidelines for NRI accounts: https://www.icici.bank.in/nri-banking/new-tds-guidelines
• ClearTax, Section 195 TDS on payments to non-residents: https://cleartax.in/s/section-195
• S Lohia & Associates, NRO remittances and Form 15CA/15CB under the new Act: https://www.slohia.com/service/nri-15ca-and-15cb-for-nris-ocis-residents-remittance-payment-to-non-residents/
• Galactic Advisors, repatriation of funds from NRO accounts: https://www.thegalacticadvisors.com/repatriation-of-funds