Difference Between NRE Account and NRO Account

For an NRI, the choices of transferring his foreign earned income come to a question when there are NRO, NRE and FCNR accounts exclusively open for NRIs. So, this article is all about knowing the difference between an NRE and NRO account. 

The differences between both the NRI account are stated based on certain factors. Let's have a look at them.

Meaning:

• An NRE account is where NRIs can save their foreign earned income. It allows you to transfer your foreign earnings to India.
• An NRO account is a type of NRI account, which is used to deposit income earned from India. 
  
  

Deposits:

• In an NRE account, you can only deposit foreign denominated currencies. 
• In an NRO account, you can deposit in both foreign and Indian denominated currencies. There is no restriction. 
  
  

Withdrawals

• The overseas amount that you deposit to an NRE account is converted to Indian currency and withdrawn in Indian Rupees.
• NRO account also allows the user to withdraw in Indian Rupees. 
  
  

Tax benefits 

• The principal amount and interest earned on the NRE deposits are tax-free. 
• While the interest earned income on an NRO account is liable for TDS – Tax Deductible at Source. 
  
  

Repatriation benefits

• NRE savings account allows easy repatriation of funds from one account to another. You can quickly transfer both interest and principal amount to abroad as well. 
• While an NRO account allows easy repatriation of interest earned income only, you can also repatriate the principal amount but with specified limits. 
  
  

Exchange rate fluctuations

• An NRE account is under the high risk of exchange rate fluctuations. The amount you deposit on 1st June will be different from that of the amount deposited in August. Sometimes it can be lower while sometimes higher.
• An NRO account doesn't get affected by the exchange rate mechanism. This is because the NRO account is used explicitly for handling income earned in India. It usually works like a savings bank account in India. 
  
  

Minimum balance required

• The minimum balance needed in an NRE account is comparatively higher than an NRO account. Some banks need NRIs to keep a minimum balance of 10,000 or above. 
• While an NRO account requires you to keep only a minimum balance of 3000 or lower, as per the banks' criteria, each bank's minimum balance norms vary. 
  
  

Joint account holder

• An NRE account can be opened jointly. The other person should also be an NRI to open a joint account. 
• Same is the case with NRO account; you can open a joint NRO account, provided the second party is also a non-resident of India. 
  
  

Nomination facility

• NRE account allows the customer to enable a nominee for his account. 

NRO also provides nominee facility so that in case of the death of the account holder, the amount and account maintenance can be handed over to the nominee. 

Sponsor Ads

• Ad Space Available - Rent it Now!

Report this Page

Created on Mar 31st 2020 02:13. Viewed 259 times.

Share on APSense

Comments