Question

A savings or current account held in India that helps NRIs manage income earned in India, such as rent, dividends or pension, on which interest earned is taxable, is called :

• A. Non-Resident Ordinary Rupee Account (NRO)
• B. Non-Resident External Account (NRE)
• C. Foreign Currency Non-Resident Account (FCNR)
• D. Current Account

Hint:

Indian income of an NRI, kept in rupees, with taxable interest, goes into the NRO account.

Answer 1

The Correct Option is A

Step 1: Read the clues in the question:
The account is held in India. It holds Indian income of an NRI, such as rent, dividends or pension. The interest on it is taxable in India.

Step 2: Recall the types of NRI accounts:
NRO means Non-Resident Ordinary Rupee Account. It is a rupee account used to manage income earned in India. Interest earned is taxable.
NRE means Non-Resident External Account. It holds foreign earnings sent to India, and its interest is tax free.
FCNR means Foreign Currency Non-Resident Account. It is a term deposit kept in a foreign currency.

Step 3: Match the clues:
Income earned in India plus taxable interest points to the NRO account. This is option (1).

Step 4: Why the other options are wrong:
(2) NRE holds money brought from abroad, and its interest is not taxed.
(3) FCNR is kept in foreign currency as a fixed deposit.
(4) A plain current account is a business account with no interest and does not suit this description.

Final Answer:
The account is the Non-Resident Ordinary Rupee Account (NRO), option (1).