NRE Account vs NRO Account
NRE account and NRO account are two accounts available for non resident Indians. Knowing the difference between NRE and NRO account is a must for every Indian going or living abroad is concerned as these are the two options available to him as far as opening a bank account back in India. It is in your own interest to know the different features of both the accounts so as to choose one which is better suited to your requirements. To facilitate sending funds back to their homes, government of India has allowed opening of NRE and NRO accounts to all Indians who are Non Resident Indians. As an NRI, you should know whether NRE or NRO is better for you and if you can open both accounts. Here is a brief description of both types of accounts.
This is an account based on Indian currency, that is funds maintained in the account are in rupees. It can be a savings, current or fixed/term deposit account. It can be opened by NRI’s. Repatriation of funds is possible through NRE account implying funds can be sent to any other country. NRE account can have money remitted from a foreign country or from any other NRE or FCNR account being maintained in India. Normally, NRE is held by a single person, but it can be held jointly with the condition that the joint holder must be an NRI. Any Indian cannot open a NRE account on behalf of an NRI even though he may have power of attorney. But such power of attorney holder can deposit money in any NRE account. NRE accounts provide the facility of nomination. If any NRI returns and becomes a resident Indian, the account is automatically converted into a normal bank account.
NRO also is a rupee based account meaning funds are maintained in rupees. It can be a fixed/term deposit account, current or savings. It can be opened by NRI’s, and any normal account held by an Indian convert into NRO upon his becoming an NRI. It is not possible to repatriate funds from an NRO account. One can make only local (within India) payments using funds in a NRO account. It is possible to open joint NRO account with another NRI or even a resident Indian. This is not a tax free account and the interest earned is taxed as per prevailing rates. As in the case of NRE, power of attorney does not entitle an Indian to open NRO account on behalf of any NRI. But a power of attorney holder can make payments into such an account. Facility of nomination is allowed in NRO account.
Differences between NRE and NRO account
• While NRE can be opened by only NRI, NRO can be opened by a resident before becoming an NRI.
• While repatriation is allowed in NRE, it is normally not allowed in NRO.
• NRE is tax free, while NRO is taxed.
• NRE allows only foreign currency deposits, while NRO allows for both foreign currency and rupee deposits.