If you are an NRI (Non-Resident Indian) or planning to move abroad, you have likely come across the terms NRE and NRO accounts. While both are meant for non-residents, they serve different purposes and follow distinct regulations.
This guide will help you understand the key differences between these two accounts — from usage, and fund transfer rules to practical advice on which one is right for you.
Introduction
| Topic | Details |
|---|---|
| Subject | NRE vs NRO Account |
| Intended Audience | NRIs or individuals planning to become NRIs |
| Purpose | To help readers choose the right account based on their financial needs |
What Are NRE and NRO Accounts?
| Account Type | NRE (Non-Resident External) | NRO (Non-Resident Ordinary) |
|---|---|---|
| Purpose | For depositing foreign income in India | For managing income generated in India |
| Currency | Foreign currency (converted to INR) | Indian Rupees (INR) |
| Taxation | Interest earned is tax-free in India | Interest earned is taxable in India |
| Fund Repatriation | Fully repatriable (principal and interest) | Limited to certain amount per financial year (with compliance) |
| Joint Holding | Allowed only with another NRI | Allowed with an NRI or an Indian resident |
When Should You Use Each Account?
| Use Case | Recommended Account |
|---|---|
| Transferring foreign salary to India | NRE Account |
| Receiving rent or dividends from Indian assets | NRO Account |
| Earning tax-free interest in India | NRE Account |
| Joint account with parents or spouse in India | NRO Account |
| Investing in Indian markets using Indian income | NRO Account |
| Repatriating funds to your foreign account | NRE (easier), NRO (restricted) |
Quick Comparison Table
| Feature | NRE Account | NRO Account |
|---|---|---|
| Source of Funds | Income from outside India | Income from within India |
| Currency Held | Indian Rupees (after foreign currency conversion) | Indian Rupees |
| Repatriation | Freely repatriable | Limited to certain amount year (requires compliance) |
| Tax on Interest | No | Yes (TDS applicable) |
| Joint Account Option | With another NRI only | With NRI or Indian resident |
Documents Required to Open These Accounts
| Document Type | Details |
|---|---|
| Identity Proof | Valid passport |
| Residency Proof | Valid visa, work, residence permit |
| Overseas Address Proof | Utility bill, bank statement, or other as per bank complaince |
| PAN Card | Mandatory for most banks |
| Passport-sized Photograph | Required |
| Bank Application Form | Provided by the chosen bank |
Key points for NRIs
- Use NRE for saving and investing foreign income in India without paying Indian tax.
- Use NRO to handle income from Indian sources like rent, dividends, and fixed deposits.
- For a joint account with a resident family member (e.g., parents or spouse), choose an NRO account.
- To repatriate money from your NRO account, you will need a CA certificate (Form 15CA &/or 15CB)
- Always consult with a chartered accountant or tax advisor to remain compliant with FEMA and RBI rules.
Which Account is Right for You?
| Scenario | Best Account |
|---|---|
| Sending foreign income to India tax-free | NRE Account |
| Managing income earned in India | NRO Account |
| Repatriating large amounts abroad | NRE Account |
| Having a joint account with a resident family member | NRO Account |
| Want to separate Indian and foreign incomes | Use both accounts with corrections wherever required |