Difference between NRE Account and NRO Account

By Ryan Joseph

 What is difference between NRE and NRO account? ” when I was to leave India for the first time. I was confused about what type of bank account (NRE or NRO account) I need to open as an NRI. So I know how you feel exactly now and you're currently going through the same situation which I had faced years ago. So let’s try to how to solve this.

When an Indian citizen leaves the India for any reason and decides to be out of India for a undefined time frame ( not sure about of duration of stay), then the specific men or woman might be known as NRI.

If an NRI, a Non-Resident Indian wants to remit money into any of the banks in India, then he/she could go for two major types of nri accounts which is known as – NRE account and NRO account.

An NRI should know the exact difference between NRE account and NRO account. This helps an NRI to avoid the common mistake. Government of India has accepted legally to have the NRIs to open and have an Indian Rupee account for the purpose of repatriating funds from their account at current residing foreign country.

NRI accounts are essential for an NRI to keep their earnings in INR terms until they stay there. Let’s go deeper insight about the NRE accounts and NRO accounts in India.

What is an NRE Account?

NRE is abbreviated as Non-Resident External account (NRE Account). An NRE account is an Indian Rupee denominated account, which means the deposits in an NRE account will be maintained in Indian Rupees. It can either be a savings, current or a fixed/term/recurring deposit account.

An NRE account is essentially required and actively maintained by all the NRIs. Deposits in an NRE account are fully repatriable and could be easily transferred back from an NRE account to foreign bank account. This means that funds can sent from NRE account to any foreign country outside India without any issues.

An NRE account can be opened also as a joint account so that the other person in whose name the account is to be held is also considered as a NRI.

Another excellent  feature of NRE account is, the interest on deposits held in any NRE account is exempted from taxes

The amount exists in NRE account are unreservedly repatriable.You can’t deposit cash by any means other than as settlement from abroad or transfer/exchange from an alternate NRE account.

Features of an NRE Account:

  • The income from interest on an NRE account is exempted from tax.

  • The funds that are present in an NRE account are completely repatriable and these funds could be sent to any country outside India.

  • Funds could be transferred from this account to an NRO account.

  • Facilities of joint account will be available only with an NRI.

  • Facilities of nomination will be available only with an NRI Indian.


What is an NRO account?

NRO is abbreviated as Non-Resident Ordinary Account (NRO Account). An NRO account might be opened in the form of rupee denomination and could be operated as current, savings, and recurring as well as fixed deposit accounts.

NRO account can be held mutually by the Indian residents. You could transfer funds into an NRO account from any normal bank account. An NRO account can be opened by a person of Indian origin as well as by NRIs.

An NRO account can be considered as same as an ordinary bank account which could be opened by an Indian who will travel abroad near in future with an intention to become an NRI. Any NRI could open NRO account just by sending remittances from an individual’s  own resident country or by the transfer of funds from other NRO account of that individual’s.

Normally, repatriation of funds from the NRO was not allowed. However, recently this rules and regulations have been updated and an NRO account holders can remit a maximum of a million US Dollars. An NRO account would offer you with the same facilities as that of an NRE account except that any of the repatriation can’t be done easily which includes some rules and steps to follow under the guidance of RBI.

According to an NRO account, the  interest that has been earned from any NRO account is not free from tax

Features of an NRO Account:

  • The interest that could be earned on an NRO account will be as high as determined by the banks with which you operate.

  • The facilities of joint account are available with the Indian resident as well as with an NRI individual.

  • The nomination facility is available with both NRI as well as resident Indians.

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