Difference Between NRE and NRO Accounts: Which Savings Account Should You Choose?

October 16, 2024

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When it comes to managing money in India from abroad, Non-Residential External (NRE) and Non-Resident Ordinary (NRO) Savings Accounts are two popular options. But which one to choose? Understanding the difference between the two can help you make the right choice.

In this article, we have compared NRE Vs NRO Savings Accounts, covering various aspects such as tax implications, repatriation, features, and more. Let's dive in!

What is NRE Savings Account?

An NRE Savings Account is designed for NRIs who wish to park their foreign earnings remitted to India in INR (₹). The funds deposited in the account are fully repatriable, meaning they can be freely transferred back to the foreign country or converted into foreign currency. Interest earned on NRE account is tax-free in India. However, there could be tax implications in the NRI's country of residence.

What is NRO Savings Account?

An NRO Savings Account is a Savings Account that allows NRIs to manage their income earned in India, such as rent, dividends, or any other income earned locally. Unlike NRE Account, funds deposited in NRO Savings Account are not fully repatriable. Additionally, the interest earned on NRO Savings Account is taxable under income tax laws.

Difference Between NRE and NRO Accounts

Parameters	NRE Accounts	NRO Accounts
Purpose	Designed for NRIs to manage foreign earnings in India	Designed for NRIs to manage income earned in India
Taxation	Both the principal amount and interest earned are tax-free in India. However, there can be tax implications at the NRI's country of residence.	The interest earned on NRO accounts is subject to taxation as per income tax laws in India.
Repatriation	Both the principal amount and the interest earned can be transferred abroad without any restrictions.	The interest amount is repatriable. However, you can repatriate only to USD 1 million per year subject to tax compliance.
Joint Account	You can open an NRE account with another NRI but not with resident Indians.	An NRO account can be jointly held with Indian residents or other NRIs/PIOs.
Source of Funds	NRE accounts hold foreign income	NRO accounts hold income earned in India

NRE vs NRO Savings Accounts: Factors to Consider

In case you're planning to open an NRE or NRO Savings Account, consider these factors:

Know Your Purpose

Ask yourself - Do I need the account to manage income earned in India or do I need to manage my overseas income in India or do I need both? Take a decision based on your requirement.

Interest Rate

Whether you're applying for NRE or NRO Savings Account, compare interest rates before booking. Go for the one that offers higher interest rates.

Exchange Rates

You could do a bit of research on the exchange rates offered by different financial institutions or banks. Always choose a financial institution or bank that offers competitive exchange rates.

Additional Benefits

Open your NRI Savings Account with a bank that offers maximum convenience, including easy application process, minimal documentation, and exceptional customer service among others.

Final Thoughts

Whether you choose for an NRE or NRO Savings Account depends entirely on your end-purpose. You can actually open both accounts in case you have and want to manage income generated in India. However, before booking an NRE or NRO Savings Account, consider the interest rate offered, ease of transaction, exchange rates offered, etc., so you can make an informed decision

Ujjivan SFB offers NRI Savings Accounts that comes with no monthly average balance (MAB) criteria, higher interest rates, secure inward and outward remittance facility, and more. We also have other Savings Account products to suit your financial goals. Alternatively, you can browse through Ujjivan SFB product suite - our wide range of financial products are designed to make your financial life better.

FAQs

1. Can I have both NRE and NRO accounts?

Yes, NRIs can have both NRE and NRO accounts simultaneously. These accounts serve different purposes. An NRE account helps you manage your foreign earnings in India, while an NRO account allows you to manage income earned in India.

2. What are the tax implications on NRE and NRO accounts?

The interest earned on NRE account is tax-free in India. On the other hand, the interest earned on NRO account is subject to taxation as per income tax laws in India.

3. Which account is better, NRE or NRO?

The choice between NRE and NRO account depends on your end-purpose. If you wish to hold and manage foreign earnings in India, go for NRE account. However, if you wish to manage income earned in India, opening an NRO account would be apt.

4. Do I need to maintain a minimum balance in my NRE or NRO account?

Yes, banks may require you to maintain a minimum average quarterly balance in both types of accounts. However, there is no minimum balance criteria when you open an account with Ujjivan SFB.

5. Can I use my NRE or NRO account for business transactions?

No, both are meant for personal banking purposes and not for business transactions.

6. Is there a limit on the amount that can be transferred from an NRE or NRO account to another country?

There is no limit on repatriation from an NRE account, whereas repatriation from an NRO account is subject to certain limits as prescribed by RBI guidelines. To be more specific, up to USD 1 million per financial year can be repatriated after fulfilling certain terms and conditions and with proper documentation.

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