An NRI (Non-Resident Indian) with earnings both abroad and/or in India often faces difficulties in managing their finances. They also find it difficult to track bank accounts across countries, and also while repatriating money to their home country or family back in India or and/or NRI wants to keep India based earnings in India.
They sort for maintaining a Rupee A/c in India. There are two options available with NRI interested in opening bank account in India – NRE or NRO account. Moreover, as per the Foreign Exchange Management Act (FEMA) guidelines, it is illegal for NRIs to have saving accounts in their name in India. It is mandatory that you convert all your present savings (money earned abroad) to an NRE/NRO. Therefore, continuing to use the savings account in the home country can lead to complications like hefty penalties. Read further to know the difference between these two accounts. Know when to opt and choose from either of the two accounts.
Particulars |
NROA/c: Non Resident Ordinary Rupee A/c |
NRE A/c: Non Resident Rupee A/c |
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Basic Understanding: |
An NRO account, on the other hand, is a savings or current account held in India for the NRIs to manage their income earned in India. Hence, it is a good way for account holders to deposit and manage their accumulated rupee funds. | The NRE account is an Indian Rupee denominated account and it gives you complete security. It can be in the form of savings, current, recurring or fixed deposits. One can deposit only foreign currency in this account, which gets converted into INR at the time of deposit. |
| Similarities: |
· It’s an Indian Rupee A/c · Average monthly balance Required-75000/- · It requires Non-Residential Status in India on part of intended A/c Holder. |
· It’s an Indian Rupee A/c · Average monthly balance Required-75000/- · It requires Non-Residential Status in India on part of intended A/c Holder. |
| Differentiation: |
· It can be opened by a Non- Resident Indian(NRI) / Person of Indian Origin (POI)/ Overseas Citizen of India (OCI) · REPATRIATION: Restricted repatriability i.e. permitted remittance allowed from NRO is up to USD 1 million net of applicable taxes in a financial year after giving undertaking along with a certificate from a chartered accountant.Charges apply per transaction. · DEPOSIT: Generally Indian Rupees are deposited( i.e. Indian earned income) but any foreign currency deposited is automatically converted to INR · UTILITY: To keep Indian based earnings in Indian Rupees (INR) in India.Eg. Rent, Dividends, Salary. · TAXATION: The interest earned in NRO account is subject to Tax deduction at source (TDS) and credit balances are subject to respective Income Tax bracket (30%). · JOINT HOLDING: NRO account can be held with NRI as well as resident Indian (close relative) as defined under Section 6 of the Companies Act 1956 |
· It can only be opened by a Non-Resident Indian (NRI) · REPATRIATION: NRE account is freely repatriable (Principal and interest earned). Free of charge transactions and can remit money outside India in any currency. · DEPOSIT: Only foreign currency can be deposited and then it converts to INR. Cannot deposit Indian Earned Income (INR) here. · UTILITY:To remit overseas earnings to India.They are converted to INR& held in India. · TAXATION:NRE account is Tax free (no Income tax, wealth tax and gift tax) in India. · JOINT HOLDING: NRE account can be jointly held with another NRI but not with Resident Indian |
| Liquidity | Funds here cannot flow easily out of India without requisite certificate & transaction fee subject to FEMA & RBI requirements | Whereas NRE A/c allows free flow of funds in any currency without restrictions in terms of fees, denomination, amount being remitted. |
Summarizing the above facts, opt for the following considering the prime functionalities:
Opt for NRE A/c if:-
- want to park your overseas earnings remitted to India converted to Indian Rupees;
- want to maintain savings in Rupee but keep them liquid;
- want to make a joint account with another NRI;
- want Rupee savings to be freely repatriable.
- Earn higher rate of Interest and remit it tax free.
- The international debit card enables to transact and withdraw funds anytime. Also, mutual fund investments too become easier and instant, if you link your NRE account number to the investment account.
Opt for NRO A/c if:-
- want to park India based earnings in Rupees in India;
- want account to deposit income earned in India such as rent, dividends, salaries etc.;
- want to open account with resident Indian (close relative)