NRE vs. NRO accounts: Key differences and which one is right for you
The moment you attain the Non-Resident Indian (NRI) status, you are mandated to open an NRI bank account to manage finances in India. As per the Foreign Exchange Management Act (FEMA) guidelines, if you don’t convert your regular savings account after your resident status changes to NRI, you could face hefty fines for non-compliance.
Take a look at their meaning, features, and differences to understand which one may suit your requirements better.
What are NRE and NRO accounts?
An NRE account enables you to deposit foreign earnings. An NRO account helps you manage the income you earn in India. These earnings can be in the form of rent, dividends, pensions, or interest. Both accounts offer critical NRI banking services, but their repatriation rules, tax implications, and deposit restrictions differ significantly.
NRE vs. NRO accounts | Key differences
The following table outlines a few notable differences between NRE and NRO accounts:
| Feature | NRE account | NRO account |
| Purpose | To park overseas income in Indian denomination | To deposit funds earned in India as well as from foreign sources |
| Taxation | Interest is non-taxable in India | Taxes apply in India on any interest you earn |
| Repatriation | Fully repatriable (principal + interest) | Up to USD 1 million can be repatriated per financial year after paying applicable taxes |
| Joint account eligibility | With another NRI or a resident relative (on a ‘former or survivor’ basis) | With another NRI or a resident Indian |
NRE vs. NRO account | Which should you choose?
Choosing the right NRI account for your banking needs can be a difficult decision to make, but this breakdown will make it easier.
An NRE account could be a good option if you:
- Earn only in foreign currency and wish to send money to India
- Want tax-free interest on savings and deposits
- Need to repatriate funds without restrictions
- Want to transfer money freely between NRE accounts or to an NRO account
An NRO account may be more suitable if you:
- Earn income in India (interest, pension, business profits, etc.)
- Wish to deposit INR and foreign currencies
- Don’t need to send large amounts abroad
- Are comfortable paying taxes on interest income in India
You are not limited to just one choice. Many NRIs find it beneficial to maintain both NRE and NRO accounts to handle different income sources. If you earn from foreign sources but also have income from Indian assets, keeping both accounts helps you separate funds for taxation and remittance purposes.
Steps to open an NRI account
First of all, select the right private bank for your NRI banking needs. The best bank for an NRI account is one that offers high interest rates on deposits, low remittance fees, exclusive privileges, and strong digital banking services. After finalising a bank, follow these steps:
- Visit the bank’s website. Go to the NRI banking section.
- Find the NRI account opening option.
- Fill out the form with personal details. A bank official might contact you to guide you through the account opening process and KYC formalities.
- Upload the relevant documents.
- After verification, your NRI account will be opened.
Now, manage foreign and Indian income, investments, and transactions hassle-free.
To sum up
Deciding between an NRE and an NRO account depends on where your income originates, your financial needs related to taxation, and how you plan to use and transfer funds. You can open both accounts to efficiently handle overseas earnings and Indian income separately. This separation makes tax compliance easier, helps with remittances, and gives better control over cross-border earnings.
Make sure to choose the right banking partner that offers premium NRI banking services. You should be able to benefit from competitive interest rates on account balances, seamless remittance services, digital tools, and a transparent cost structure.
