Moving abroad? As you gain the NRI status, a lot of things change, including how you manage your finances. If you’re an NRI with a dependent family in India, you need a convenient and hassle-free way to handle and send money to your family in India.
In this regard, you have two excellent solutions- NRE (Non-Resident External) account and NRO (Non-Resident Ordinary) account. NRE accounts let you deposit foreign income earned outside India, while NRO accounts can be used for depositing income earned in India, such as rent, dividends, or pension.
Now, if you’re looking to manage both Indian and foreign incomes, you can easily open both types of accounts to manage your finances better. So before you jump on the wagon, here’s everything you need to know about NRE and NRO accounts as well as NRE and NRO account differences.
NRE and NRO accounts
Managing finances while living abroad can be challenging for Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs). However, since NRIs cannot operate a resident savings account as per the RBI, you need to open an NRE or NRO account, or both, to carry out any banking transactions in India.
Here’s a rundown on the NRE and NRO account differences.
| Aspect | NRE account | NRO account |
| Purpose | Park foreign earnings in India in Indian currency | Manage income earned in India. For example: rent, pension, interests, etc. |
| Repatriability | Funds can be easily repatriated without limits | Limited repatriation up to $1 million in a financial year after paying applicable taxes |
| Taxability | Tax-free interest earnings | Tax deduction on interest earnings, subject to TDS |
| Exchange Rate Fluctuation | Since an NRE account lets you deposit your foreign earnings in India, funds are subject to exchange rate fluctuations and conversion loss | No such risks are involved because the funds are maintained in Indian currency |
| Deposit and Withdrawal | You can deposit funds in foreign currency and withdraw in Indian currency | You can deposit funds in Indian as well as foreign currency and withdraw the funds in Indian currency |
| Joint Operations | You can open an NRE account jointly with an NRI/PIO and operate with a resident Indian relative on a ‘former or survivor’ basis | You can open an NRO account jointly with an NRI/PIO and with a resident Indian on ‘former or survivor’ basis |
| Transfer of Funds | You can transfer funds to another NRE account and also NRO account | You can transfer funds to another NRO account, but not to an NRE account |
Eligibility for Opening NRE/NRO Account-
- Person of Indian Origin (PIO) or NRI
- Seafarers of Indian nationality/origin or employed by overseas shipping companies
- Students pursuing studies in foreign countries
In the End
Both NRE and NRO accounts are viable options for NRIs to deposit, grow, and manage their funds safely. Depending on your financial situation and transactional needs, you can easily open both an NRE account to manage your foreign income in India and an NRO account for your domestic earnings in India, to manage and transfer your funds seamlessly.
So, what are you waiting for? Get in touch with your banking partner to know more about these NRI accounts.
