What Are NRE and NRO accounts?
NRE is a non-resident external account and NRO is non-resident ordinary. If you are an NRI, then you can easily open a joint NRO account with other citizens of India. You can choose an NRO account if you are working in India and your total income is from India, but you want to utilize it to another country. If you want to deter the foreign tax penalties, you can open an NRI account. If you have a foreign income in foreign currency, you can easily transfer that amount to your country’s account.
Difference between NRO and NRE
Many of us get confused with the two accounts namely NRO and NRE. We think that they are the same. But a real fact is that there is a difference between NRO and NRE accounts. Let’s look at the differences.
An NRE account is opened in the bank of India in NRIs name to take his foreign earnings. NRO is a bank account which is opened in India, in the name of NRI to organize his revenue achieved by him in India. These incomes include house rent, pension, etc.
- Fund transfer
The money can be transferred from one NRE account to the other NRE account and also in a NRO account.
But you can never transfer funds from a NRO account to a NRE account.
- Joint Account
In the case of an NRE account, it is not possible to open an NRE account with any Indian citizen. You can only open it with a NRI. But if you are the account holder of NRO, then you can open a joint account with the Indian citizen.
- Deposit Rules
Foreign currency can be deposited in both NRE and the NRO accounts. In the case of NRO, INR denominated funds which are arisen in India can be deposited in the NRO accounts.
- Taxation Rules
In an NRE account, the tax will be exempted from the interest which is earned on the deposit. In the NRO account, the income is taxed. There are some tax benefits, with the help of which, an NRI can avoid the tax liabilities.
- Fluctuations of Currency
The currencies which are deposited in an NRE account are always fluctuating. In the case of NRO accounts, there are no currency fluctuations noticed.
In an NRE account, both the principal amount as well as the interest both can be earned. Repatriation is prohibited in NRO accounts. NRO account tax is much higher as compared to NRE.
Similarities between NRO and NRE accounts
NRO and NRE, both are different in terms of their features and characteristics. But there is a basic similarity between NRO and NRE accounts.
- An account holder can hold any of this account as a savings or current account in India.
- In both the accounts, you have to maintain at least 75 thousand rupees in Indian currency.
- In both the banks, the funds can be deposited from other banks.
- From both the bank accounts, you can withdraw your money, whenever you need it.
Which Account For Me?
You must have got an idea for both NRO and NRE accounts. Both the accounts are Indian rupee accounts, especially for NRIs. If you are in doubt about which bank account is perfect for you, then let us discuss the detailed characteristics of the NRE and NRO accounts.
Those who are NRI, they often maintain Indian bank accounts for various purposes. Some need bank accounts to get their income which they are drawing from India, whereas others want to invest their money which they are earning abroad to Indian banks. If an NRI is holding a bank account, you need to be careful. His existing bank accounts have to be reclaimed to none Indian rupee accounts. So, in order to avoid the tax liabilities, one needs to open the bank account of NRE and NRO.
You will have complete rights to open an account as an individual.
NRE bank accounts
NRE meaning as we mentioned earlier is Non-resident external.
The principal amount and interest amount in a NRE account are exempted from taxes in India, i.e. it is nontaxable. NRE account rules also substantiate to be a tremendous way to capitalize on income in appliances such as fixed deposits, savings, stocks, and also to earn returns.
NRE is also incredibly beneficial when NRIs expect to meet monetary commitments back home such as family expenditures, the expenditure of kids’ school fees and also subsidizing for retirement.
Moreover, the principal amount and the rate of interest which is achieved can be willingly repatriated from India to the nation of the dwelling of the account holder.
According to me, an NRI account benefits you in all aspects.
NRO bank accounts
Non-Resident Ordinary Accounts (NRO) are the accounts which are specifically formulated for those persons who aspire to deposit their revenue in India which comes from house rent, pensions, salaries etc.
NRO account funds are taxed at the rate of 30% along with other applicable taxes. In order to avoid the tax liabilities, the account holder has to submit the Tax Residency Certificate which can be issued by tax authorities of the account holder’s living country.
If you are an NRI, you can keep both the accounts. But it would be hectic to maintain both the banks at a time. Now that you have got an idea of both of these accounts, it’s your time to decide which one to open! But if you are an NRI, and don't have much knowledge regarding the bank accounts, all you need to do is to read all the rules and regulations of both these accounts.