Difference Between NRE & NRO
5paisa Research Team
Last Updated: 21 Nov, 2023 03:58 PM IST
Want to start your Investment Journey?
Content
- What is an NRE account?
- What is an NRO account?
- Know the Difference Between NRE & NRO Account
- Explanation: Difference between NRE & NRO accounts
- How Do I Choose Which Account to Open for Myself?
- Conclusion
NRIs have the opportunity to open two types of Indian bank accounts. They can either open an NRI or an NRO account. While they are different from one another, people often confuse these accounts to be the same. We have performed a comprehensive NRE Vs NRO account analysis to help you understand their differences in detail.
What is an NRE account?
If you compare NRE Vs NRO, you will understand that a Non-Resident External Account enables you to convert your foreign income into an Indian denomination at the time of deposit. Therefore, you can deposit your funds to an NRE account in any foreign currency and withdraw it in Indian rupees.
What is an NRO account?
By comparing NRE vs NRO account, you will realize that a Non-Resident Ordinary Account is for an NRI to manage their earnings in India. The earnings can be in the form of rent, pension, dividends, and more. You will be able to receive funds in an NRO account in either Indian or foreign currency.
Know the Difference Between NRE & NRO Account
Basis |
NRE Account |
NRO Account |
Acronym |
Non Resident External Account |
Non Resident Ordinary Account |
Meaning |
Useful for an NRI to transfer their foreign earnings to India |
Useful for an NRI to manage their income obtained in India |
Taxability |
Tax-free |
Taxable |
Repatriability |
Fully repatriable |
Interest is repatriable and the principal amount is only repatriable within the set limits |
Joint Account |
Two NRIs can open it together |
Can be opened with another NRI or Indian citizen |
Deposits and Withdrawals |
Deposits in foreign currency and withdrawals in Indian rupee |
Deposits in foreign as well as Indian currency and withdrawals in rupees |
Exchange Rate Risk |
Risk-prone |
No risk |
Fund Transfer |
Transferred from one NRE account to another and from an NRE account to a resident or NRO account |
Can only be transferred to an NRO or resident account |
Currency Fluctuations |
Exposed to currency fluctuations |
Not exposed to currency fluctuations |
Explanation: Difference between NRE & NRO accounts
Both NRE and NRO accounts are opened by NRIs. But you will come across significant differences between NRE and NRO accounts. Some of the most prominent differences are as follows:
● Purpose
The first NRE and NRO account difference is in terms of their purpose. An NRE account is useful for transferring foreign earrings to India in rupees. An NRO account serves as a savings account for managing income earned in India by an NRI.
● Repatriability
Another difference between NRE and NRO accounts is in terms of repatriability. Deposits in an NRE account are fully repatriable, including the interest. But NRO accounts come with repatriation limits. In a financial year, NRIs can repatriate only up to Rs 1 million from an NRO account.
● Taxation
In the debate of NRE vs NRO accounts, NRE accounts are the clear winner because of their tax exemption. The principal, as well as the interest in an NRE account, are exempted from taxes. On the other hand, interest in an NRO account attracts TDS.
● Fund Transfer
The funds from an NRE account can be transferred to another NRE, NRO, and resident account. But the funds from an NRO account can only be transferred to another NRO or resident account.
● Account Holding
Both NRE and NRO accounts can be jointly opened by two NRIs. Moreover, these accounts can be opened by one NRI and one Indian citizen.
● Exchange Rate Risk
The funds in an NRE account are free from exchange rate fluctuations as well as conversion gains and losses. Meanwhile, the funds in an NRO account are not usually affected by daily exchange rate fluctuations. But it is not always free from risk because foreign income can also be transferred to NRO accounts.
How Do I Choose Which Account to Open for Myself?
Once you understand the difference between NRE and NRO accounts, you will be able to make the right choice. An NRE bank account is perfect for storing foreign currency by converting it into Indian rupees. On the other hand, your NRO account will be solely useful for managing your income in India while you are staying abroad.
Conclusion
You should carefully consider the difference between NRE and NRO accounts before opening one that suits your interest. Remember that there is no right or wrong in this case because your decision should be based on your unique needs and income sources.
More About Generic
- What is a Virtual Payment Address (VPA) in UPI?
- Best Swing Trading Strategies
- What Is FD Laddering?
- What Credit Score is Needed to Buy a House?
- How to Deal with Job Loss?
- Is 750 a good credit score?
- Is 700 a Good Credit Score?
- What is Impulse Buying?
- Fico Score vs Credit Score
- How to remove late payments from your credit report?
- How to Read Your Credit Card Statement?
- Does Paying Car Insurance Build Credit?
- Cashback vs Reward Points
- 5 Common Credit Card Mistakes to Avoid
- Why Did My Credit Score Drop?
- How to Read a CIBIL Report
- How Long Does It Take to Improve Credit Score?
- Days Past Due (DPD) in CIBIL Report
- CIBIL Vs Experian Vs Equifax Vs Highmark Credit Score
- 11 Common Myths about CIBIL Score
- Tactical Asset Allocation
- What is a Certified Financial Advisor?
- What is Wealth Management?
- Capital Fund
- Reserve Fund
- Market Sentiment
- Endowment Fund
- Contingency Fund
- Registrar of Companies (RoC)
- Inventory Turnover Ratio
- Floating Rate Notes
- Base rate
- Asset-Backed Securities
- Acid-test Ratio
- Participating Preference Shares
- What is Expenses Tracking?
- What is Debt Consolidation?
- Difference Between NRE & NRO
- Credit Review
- Passive Investing
- How To Get Paperless Loans?
- How To Check CIBIL Defaulter List?
- Credit Score Vs CIBIL Score
- National Bank for Agriculture and Rural Development (NABARD)
- Statutory Liquidity Ratio (SLR)
- Cash Management Bill (CMB)
- Secured Overnight Financing Rate (SOFR)
- Personal Loan Vs Business Loan
- Personal Finance
- What is Credit Market?
- Trailing Stop Loss
- Gross NPA vs Net NPA
- Bank Rate vs Repo Rate
- Operating Margin
- Gearing Ratio
- G Secs - Government Securities in India
- Per Capita Income India
- What is Term Deposit
- Receivables Turnover Ratio
- Debtors Turnover Ratio
- Takeover
- IMPS Full Form in Banking
- Redemption of Debentures
- Rule of 72
- Institutional Investor
- Capital Expenditure and Revenue Expenditure
- What is Net Income
- Assets and Liabilities
- Gross Domestic Product (GDP)
- Non-Convertible Debentures
- Cost Inflation Index
- What Is Book Value?
- What Are High Net Worth Individuals?
- Types of Fixed Deposits
- What Is Net Profit?
- What is Neo Banking?
- Financial Shenanigans
- China Plus One Strategy
- What is Bank Compliance?
- What Is Gross Margin?
- What Is an Underwriter?
- What is Yield To Maturity (YTM)?
- What is Inflation?
- Types of Risk
- What Is the Difference Between Gross Profit and Net Profit?
- What is a Commercial Paper?
- NRE Account
- NRO Account
- Recurring Deposit (RD)
- What is Fair Market Value?
- What Is Fair Value?
- What is NRI?
- The CIBIL Score Explained
- Net Working Capital
- ROI - Return on Investment
- What Causes Inflation?
- What is Corporate Action?
- What is SEBI?
- Fund Flow Statement
- Interest Coverage Ratio
- Tangible Assets Vs. Intangible Assets
- Current Liabilities
- Current Ratio Explained - Examples, Analysis, and Calculations
- Restricted Stock Units (RSU)
- Liquidity Ratio
- Treasury Bills
- Capital Expenditure
- Non-Performing Assets (NPA)
- What is a UPI ID? Read More
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.
Frequently Asked Questions
If you want to enjoy tax benefits, an NRE account is the right choice for you. The principal, as well as the interest amount in your NRE account, is tax-free.
NRIs can open both NRE and NRO accounts according to their preferences and requirements.
The minimum balance for an NRE and NRO account varies across banks. Before opening an NRE or NRO account, you should inquire about the minimum balance requirements at your bank.
You can withdraw money from an NRE account outside India using your international debit card. You won’t be able to deposit to your NRE account from within India, but you can make withdrawals anywhere.