NRI Bank Accounts: Difference Between NRE and NRO Account

Non-Resident Indians (NRIs) who are earning income in both India and abroad can benefit from creating two different bank accounts called NRE account and NRO account. Both these accounts can be created in any form viz. savings, current, or even fixed deposit. But what’s the difference between NRE and NRO really? Let’s find out.

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NRE Bank Account

A Non-Resident External (NRE) account is an Indian Rupee denominated account. Only foreign currency can be deposit in this account, which is automatically converted into Indian rupees.

NRO Bank Account

A Non-Resident Ordinary (NRO) account is a savings or current account for NRIs that can be used for managing money earned in India through business, property rent, etc.

The following are some other basic differences between an NRE and NRO account:

• Applicable Tax: NRE accounts are granted tax relief, but NRO accounts are not. Thus, you have to pay income tax, wealth tax, etc. with the former but not with the latter.

• Funds Deposit: Although you can deposit funds from a foreign country (or in a foreign currency) in both NRE and NRO accounts, if the funds are generated in India (or in Indian Rupees) then you can only deposit it in the NRO account.

• Joint Accounts: You cannot open an NRE joint account with a resident Indian, but you can if it’s an NRO account.

• Funds Transfer: You can transfer funds from an NRE account to another NRE or NRO account. However, you can only transfer funds from an NRO to another NRO account and not to another NRE account.