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What is NRE and NRO Account?

Updated: Feb 28, 2023

Want to learn in detail about various concepts and rules related to NRE and NRO Account. Read to know more



What is NRE and NRO Account?
What is NRE and NRO Account?


What is NRE Account?


A Non-Resident External (NRE) Account is a bank account that an NRI can open with a scheduled Indian bank in order to deposit their foreign earnings in India. These accounts can be savings, current, recurring deposit, or fixed deposit accounts. These accounts can be opened in the names of two NRIs individually or jointly. These are highly liquid accounts, and NRIs must keep at least Rs. 75000 in their NRE account throughout the year.


The Advantages of Opening an NRE Account in India


According to FEMA regulations, an NRI is not permitted to open a regular savings account in India. As a result, NRIs who earn foreign currency in India can open an NRE account and deposit their earnings. This account will allow NRIs to save money earned outside of India in Indian rupees.


Furthermore, this account allows NRIs to freely repatriate all funds in their NRE account back to their country of residence.


Moreover, it will enable an NRI to invest in India. Also, an authorized family member in India can easily access the funds available in the account.


Criteria for Opening an NRE Account


Following are the eligibility for opening an NRE savings account in India


1. The individual must be a non-resident Indian (NRI).

2. Indian citizens are permitted to study, work, or conduct business in a foreign country.

3. Employees of UN Organisations, Government of India employees, or public sector undertakings deputed outside of India

4. Person of Indian origins employed in foreign airlines.

5. Spouse of a non-Indian resident or spouse of an Indian-origin person.


What Happens to your NRE Account When you Return to India?


An NRI can open an NRE savings account when they come to India for a short visit. However, if an NRI returns to India permanently, they are not permitted to keep their NRE savings account. They will need to open an Indian bank account. If the NRI wishes to keep the funds in foreign currency, they can open a Resident Foreign Currency (RFC) Account.


What is an NRO account?


A Non-Resident Ordinary (NRO) account assists non-resident Indians in managing their income earned in India. These accounts can be used to deposit interest, dividends, rents, and other income earned in India. Deposits into the account can be made in both foreign currency and Indian currency. NRO accounts can take the form of savings, current, or fixed deposit accounts. An NRI can also open an NRO account with a resident or a non-resident Indian. Account holders must keep at least Rs. 75000 in their NRO account throughout the year.


NRO Account Taxation in India


The interest income earned in NRO accounts is subject to taxation, which is deducted at the source. Furthermore, interest income earned during the year is added to the depositor's total income and is taxable at the applicable income tax slab rate. Furthermore, the account will be subject to gift and wealth taxes.


The distinctions between NRE and NRO accounts


1. Definition:


NRE accounts are used for depositing income earned both in India and abroad. Whereas NRO accounts, are only used to deposit income earned in India.


2. Repatriability:


Deposits and interest earned on an NRE account are highly liquid and easily repatriable. An NRO account, on the other hand, allows you to transfer or repatriate USD 1 million per year.


3. Taxation:


Interest earned on deposits in an NRE account is tax-free in India. The income from the NRO account, on the other hand, is taxable. This tax, however, can be avoided by taking advantage of any benefits provided by the Double Taxation Avoidance Agreement.


4. Deposit and Withdrawal rule:


In NRE accounts, one can deposit in foreign currency and withdraw in Indian rupees. An NRO account, on the other hand, allows for deposits in both Indian and foreign currency. Withdrawals, on the other hand, must be made in Indian rupees.


5. Funds Transfer:


Transferring funds from one NRE savings account to another NRE savings account and to an NRO account is possible. Funds from one NRO account can only be transferred to another NRO account.



We hope the above blog was helpful in enhancing your knowledge on the matter. In case of any queries feel free to get in touch with our team of experts.


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