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NRE vs NRO Account : Difference Between NRE and NRO Account

Summary: Confused between NRE vs NRO account? As an NRI here are the things you must know before choosing between the two. Read for more information.

10 Dec 2023 by Team FinFIRST


Non-Resident Indians (NRIs) often find managing their foreign investments in India cumbersome. Identifying the right account to store one’s money can be very confusing, given the number of products in the market. In this connection, NRE and NRO accounts are two main tools NRIs can rely on. NRE means Non-Resident External Account, and NRO stands for Non-Resident Ordinary Account. 

Before you choose one of these, you must know the difference between an NRE and NRO account. Read on to know more.

NRE vs NRO Account
 

NRE and NRO accounts have different functions and characteristics, which is why an NRI must know the difference between an NRE and NRO account before opening one of them: 

Purpose
 

A Non-Resident External account can be used as a bank account to transfer foreign earnings to India in Indian rupees. An NRO account can be used as a savings account to manage the income earned in India by an NRI in Indian rupees. This can include pension, rental income, dividend income, etc.

Repatriability
 

All deposits made to a Non-Resident External account, including the interest earned, are fully repatriable. NRO accounts have repatriation limits. You can repatriate up to USD 1 million in a financial year from a Non-Resident Ordinary account after paying all the applicable taxes.

Taxability
 

All deposits in an NRE account are free from income tax. This includes the principal amount as well as the interest earned. The interest earned on an NRO account, however, is subject to Tax Deductible at Source (TDS).


Account holding

An NRE account can be held jointly by two NRIs or an NRI and a resident Indian citizen. An NRO account can also be opened by an NRI along with an Indian citizen or other NRIs.

Fund transfer
 

Another difference between an NRE and NRO account is that funds can be transferred from one NRE account to another. They can also be transferred from an NRE account to a resident as well as an NRO account. Funds from an NRO account can only be transferred to an NRO account and to a resident account however, not to an NRE account.

Exchange rate risk
 

An NRE account is affected by exchange rate risks such as fluctuations and conversion losses/gains. An NRO account is less likely to be affected by daily exchange rate fluctuations, although not always free from the risk as foreign income can also be transferred to NRO account.

NRE vs NRO: Which one should you choose?
 

There is no universal right or wrong account. As an NRI, you should arrive at a decision based on your unique needs and income sources. You can use an NRE bank account to store foreign currency converted to Indian rupees, while an NRO account is used to keep both foreign income and money earned in India. NRO accounts have a limit for repatriation up to USD 1 million per financial year, but NRE accounts have no such limit. IDFC FIRST Bank offers NRI savings accounts with both NRE and NRO options to help expats manage their foreign direct investment FDI. These two accounts can help NRIs to invest and manage their money seamlessly.  You can also keep track of all your accounts with the IDFC FIRST Banking App




Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

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