NRE vs NRO accounts: Source of funds, taxation, currency of deposit, repatriation limits explained

If you are a non-resident Indian (NRI) and want to manage your financial affairs in India, you have the option of opening bank accounts that are geared towards your specific needs because NRIs are not allowed to open regular savings accounts.

The two types of bank accounts designed to ease NRIs’ financial transactions are the non-resident external (NRE) and nonresident ordinary (NRO). Both these accounts can be maintained simultaneously by NRIs and come with a minimum balance requirement.

Find out how the two differ so that you can pick the one more suited to your needs.


How the accounts differ

NRE account

This account serves the purpose of NRIs who want to park their foreign earnings in India. A big advantage is that the interest income is tax-free for an NRE account, according to the Income Tax Act, 1961.

Besides, the NRIs can repatriate money from an NRE account to overseas accounts in the country of their residence without a chartered accountant’s certificate.

The account can be opened individually only by an NRI or an Overseas Citizen of India (OCI). It can also be opened and operated jointly with another NRI/OCI or a resident Indian on an ‘either or survivor’ basis.

One can open NRE savings, current, term deposit, recurring deposit and fixed deposit accounts.

NRO account

This is for the NRIs who want an account to keep their Indian earnings. The income must be generated in India and can be in the form of rent, dividends, interest or from a business. It is subject to Indian taxation laws and, hence, the income is taxed as per the account holder’s tax bracket. There is also a limit on the amount that can be repatriated. The types of accounts and account opening eligibility are similar to that for an NRE account.