Difference Between NRE and NRO Account

Are you a non-resident Indian, or are planning to shift abroad soon? Read this article to know the difference between NRE and NRO accounts, and decide which is the best option for you.

Importance of NRE and NRO Accounts

Before we get into the differences between NRE vs NRO accounts, let us glance at their uses. Why do people need these accounts?

The major importance of NRE and NRO accounts is to help NRIs (non-resident Indians) manage their earnings with ease. They may be earning money from both Indian as well as foreign sources, which can make tracking their money a challenge. 

According to current guidelines, an NRI needs to convert their regular savings account to an NRE or an NRO account. They cannot have a savings account in their name in India. Thus, NRE and NRO accounts are the only option for NRIs.

What is an NRE Account?

NRE is short for Non-Resident External Account and it offers complete security to the account holder’s funds. All money deposited in this account gets converted to INR or Indian Rupees. So you can deposit funds in any currency, but only withdraw INR.

The money that you deposit in this account must have been earned outside of India. You can transfer money to both NRE and NRO accounts from an NRE account. It is exempt from taxes and is mostly used for personal and business banking, and making investments in India.

What is an NRO Account?

NRO stands for Non-resident Ordinary Account and it’s main purpose is to manage funds that are earned in India by an NRI, for example, pension, rent, etc. This account can be jointly held by an NRI and a resident Indian, which makes it a great choice for families where only one or two members are NRIs.

The funds in this account are subject to TDS deductions. These accounts allow both foreign and INR to be deposited, unlike NRE accounts. But, withdrawals can be made in INR only.

NRE vs NRO Account

The major differences between NRE and NRO accounts are mentioned in the table below - 


Criteria NRE Account NRO Account

Full Form

Non-Resident External Account

Non-Resident Ordinary Account

Purpose

To deposit funds earned abroad

To maintain funds earned in India

Currency Options

Only foreign currency can be deposited, and INR can be withdrawn

Both foreign and INR can be deposited, but only INR can be withdrawn

Account Holding

2 NRIs can hold an account

An NRI and a resident Indian can hold an account

Fund Transfer

Both to NRE and NRO accounts

Only to NRO accounts

Repatriability

No limit

Up to USD 1 million in a financial year

Exchange Rate

Can be affected by 2 types of losses

Considerably safer

Taxability

Exempt from taxes

TDS is deducted

Difference Between NRE and NRO Account

This section talks about each criterion and how they vary between an NRE and an NRO account. 

Purpose

Both the NRE and the NRO account are savings accounts opened by NRIs but their purpose differs slightly - 

Currency Option for Fund Deposit

Currency varies from country to country. Here is how the currency you can deposit in NRE and NRO accounts vary - 

Account Holding

Often you may want to jointly hold a bank account with your spouse or close relative. Who you can hold the account with is different for an NRE vs NRO accounts - 

Fund Transfer

You may need to transfer funds from your bank account to another for various purposes. Here is the difference between NRE and NRO accounts on the basis of transferring funds - 

Repatriability

Repatriation refers to the moving or transferring of liquid funds from or to a foreign country. This is how it varies in an NRE vs NRO account - 

Exchange Rate Risk

You may lose some money due to the varying exchange rates. But one type of account is safer than the other when it comes to losses - 

Taxability

Paying taxes is inevitable. But can you save taxes depending on which type of account you open? Here is how taxes are deducted for each of these accounts - 

Conclusion

Both NRE and NRO accounts are useful for NRIs to manage their funds. With some major differences, they have their own advantages and disadvantages. 

You should take a close look at what your needs are and then decide which account will be the best choice for you. You can also choose to have two accounts - one NRE and one NRO. This way you will be able to manage your funds most comfortably.

Difference Between NRE and NRO Account - Related FAQs

The major disadvantage of an NRO account is that there is a limit to how much funds you can repatriate in a financial year. You can only remit USD 1 million of your principal amount after paying the applicable taxes. 

Yes, you can withdraw money from an NRE account in India in INR.

The main advantage that an NRO account has over an NRE account is that it allows you to deposit money in both foreign as well as Indian currency.

There are three types of accounts that NRIs can open to manage their funds - Non-Resident Ordinary Account (NRO), Non-Resident External Account (NRE), and Foreign Currency Non-Resident Accounts (FCNR) accounts.

NRE and NRO are separate accounts, but you can open both accounts as an individual.

Was this information useful?

300 characters allowed (alphanumeric and special characters such as comma, full stop, @, ", &)

Thank you. Your feedback is important to us.

banking_account_page_leads,banking_account_page_leads_footer_stickybar_difference-between-nre-and-nro-account

Apply for personal loan

+91
Green Tick Success

Thank you for your interest!

We will reach out to you shortly