Can My Parents Deposit Money in My NRO Account?

Non-Resident Ordinary (NRO) accounts serve as a financial bridge for Non-Resident Indians (NRIs) to manage their earnings and financial obligations within India. These accounts are designed to handle rupee-denominated income generated in India, providing a regulated framework for NRIs to maintain a financial presence in their home country. Understanding the specific rules governing NRO accounts is important for effective financial planning and compliance with Indian regulations.

Understanding NRO Accounts

A Non-Resident Ordinary (NRO) account is a rupee-denominated bank account in India that enables Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) to manage their income earned within India. This includes various forms of local earnings such as rental income from property, dividends from investments, pension payments, and interest accrued on deposits in India. Funds originating from outside India, if deposited into an NRO account, are converted into Indian Rupees at the prevailing exchange rate.

The primary purpose of an NRO account is to facilitate the management of domestic income and expenses for NRIs. Credits to an NRO account include inward remittances from abroad through banking channels, legitimate dues in India, and transfers from other NRO, NRE, or FCNR(B) accounts. Proceeds from the sale or maturity of investments in India, such as mutual funds, shares, and property, can also be credited. Debits allow for local payments in Indian Rupees, investments within India, and remittances outside India, subject to regulatory compliance.

Deposits by Resident Individuals

Resident individuals, including parents, are permitted to deposit money into an NRO account held by an NRI. This is allowed for purposes such as gifts, family support, or repayment of loans. Reserve Bank of India (RBI) regulations permit rupee gifts or loans made by a resident to an NRI or PIO relative to be credited to their NRO account. These transactions must adhere to the limits prescribed under the Liberalised Remittance Scheme (LRS) for the resident individual.

When a resident deposits funds into an NRO account, banks require documentation detailing the source of these funds. While cash deposits are permissible, they must originate from legitimate Indian sources. For cash deposits exceeding ₹50,000, banks require the depositor’s Permanent Account Number (PAN) and proof of the source of funds to ensure compliance with anti-money laundering regulations.

Tax Implications for Deposits

The tax treatment of funds deposited into an NRO account by resident individuals varies based on the nature of the deposit and the relationship between the depositor and the Non-Resident Indian (NRI) recipient. If the deposit is classified as a gift, Indian income tax laws apply. Gifts received by an NRI from a resident relative are fully exempt from income tax in India, regardless of the amount. This exemption covers gifts from close family members, including parents, children, siblings, and spouses.

However, if an NRI receives a gift from a non-relative resident, the tax implications change. Gifts from non-relatives are taxable if their value exceeds ₹50,000 in a financial year. The entire amount of the gift becomes taxable as “income from other sources” for the NRI recipient. The Liberalised Remittance Scheme (LRS) sets an annual limit of USD 250,000 for a resident Indian to remit funds abroad, which includes gifts. This limit applies to the donor’s ability to send funds abroad, not to the taxability of gifts received by an NRI from a resident relative within India.

Repatriation of NRO Funds

Repatriation refers to transferring funds from an NRO account in India to an overseas bank account. Non-Resident Indians (NRIs) are permitted to repatriate funds from their NRO accounts, subject to RBI regulations and limits. The annual repatriation limit from all NRO accounts is USD 1 million per financial year (April to March).

For any remittance from an NRO account, all applicable taxes on the funds must be paid in India. This requires submitting specific forms to Indian tax authorities and the bank. For remittances exceeding certain thresholds, a Chartered Accountant’s certificate in Form 15CB is required. The remitter must file Form 15CA, a declaration of tax compliance.