NRO account and NRE account are two account options for the NRI in India. NRI (Non Resident Indian’s) many times get confused with NRE account and NRO account as the name of these accounts are more or less similar. So, what is the difference between NRE account and NRO account? Why two different accounts are required? Let’s try to figure out the differences and similarities between these accounts.
What is NRE Account?
- NRE stands for Non-Resident External Account. Any NRI can open NRE account.
- Definition of NRI for opening NRE account is any Indian national who has lived outside of India for a period of no less than 180 days in the previous year.
- NRE account is opened using foreign currency.
- NRE account allows the account holder to transfer money conveniently and securely to India.
- Money transferred in NRE account in the form of any foreign currency is converted to INR and kept in a form of INR.
- NRI can repatriate all the funds along with the interest earned at any point of time without having to pay tax on the interest amount.
What is NRO Account?
- NRO stands for Non-Resident Ordinary Account.
- NRO account allows an account holder to maintain and manage income earned in India like rent, dividend etc.
- Any Indian resident as a joint account holder can operate this account.
- NRO account is also denominated in Indian Rupees.
- Existing saving account can be converted to NRO account.
- NRO account is restricted in terms of repatriablity. Permitted remittance allowed from NRO is up to 1 million USD in a financial year.
Select NRE account if –
- You want to keep your foreign earnings remitted to India converted to Indian rupees.
- You want to keep joint account with another NRI.
- You want money to be freely repatriable.
- You want to maintain liquidity.
Select NRO account if:
- You want to keep your India based earning in India in INR.
- You want to keep joint account with resident Indian (relative).