DIFFERENCE BETWEEN NRE & NRO ACCOUNT

DIFFERENCE BETWEEN NRE & NRO ACCOUNT

NRE account (Non Resident External Account)

• An NRE account is a bank account opened in India in the name of an NRI (Non-resident Indian), to park his foreign earnings.
• NRE accounts are exempt from tax. Neither the balance, nor the interest earned on these accounts is taxable.
• The principle amount in an NRE account, and the interest accumulated thereon is open to repatriation. In other words, you can transfer these amounts to a foreign account in case of an NRE account.
• An NRE account can be opened if you want to transfer your foreign income to India and want to avoid taxation liabilities.
• There can be a joint NRE account but only with another NRI.

NRO account (Non Resident Ordinary Account)

• An NRO is a bank account opened in India in the name of an NRI to manage the income earned by him in India. Such incomes include rent, dividend, pension, interest, etc.
• The interest earned on an NRO account is however taxable at 30% according to the Income Tax Act 1961.
• In case of an NRO account, the interest amount can be repatriated; however, in case of the principle amount, you can remit only up to USD 1 million in a financial year.
• If one’s total income includes income earned in India and want to manage it within the country, he can opt for an NRO account.
• An NRI can open a joint NRO account with one or more NRIs or Indian citizens.

Income, Deposit and Withdrawal

Income originating outside India can be deposited into any of these accounts. However, income originating within India can be deposited only into the NRO account. Withdrawals from both the accounts can be made only in INR.

In case of an NRO account, if the deposit as well as the withdrawal is made in INR, there is no exchange rate risk involved; whereas, in case of an NRE account, currency fluctuations make you prone to exchange rate risks.

Key Differences

See also…

TYPES OF ACCOUNTS
TYPES OF CARDS
INSTRUMENTS ACT
Banking Awareness Important Topics