The Difference Between NRE and NRO
Introduction
Indian citizens living abroad, as well as foreign nationals, have the option of opening NRE (Non-Residential External) and NRO (Non-Residential Ordinary) accounts in India. Both of these accounts have different features, and it’s important for individuals to understand the difference between the two before choosing which account to open.
What is an NRE Account?
NRE account is a type of bank account in India, which can be opened by NRIs (Non-Resident Indians) and PIOs (Persons of Indian Origin). It is a fully repatriable account, which means that the funds deposited in this account can be freely transferred outside India, without any hassle. The account can be maintained in Indian Rupees (INR) and foreign currency (USD, GBP, etc.). The interest earned on the deposits in an NRE account is tax-free in India.
What is an NRO Account?
NRO account is also a type of bank account in India, which can be opened by NRIs and PIOs. Unlike an NRE account, it is not fully repatriable, which means that only the amount equivalent to the initial deposit plus interest earned on it can be transferred back to the foreign account. The account can only be maintained in INR currency. The interest earned on the deposits in an NRO account is subject to taxes in India.
Key Differences
The key difference between an NRE account and an NRO account is in the repatriability of funds. NRE account is fully repatriable, which means that funds can be transferred easily outside India, while NRO account is only partially repatriable, which means that some portion of the funds can be transferred outside India. Additionally, the interest earned on NRE account is tax-free in India, while the interest earned on NRO account is subject to taxes.
Conclusion
In conclusion, NRIs and PIOs have the option of opening NRE and NRO accounts in India. Both of these accounts have different features, and it’s important to understand the difference between the two before choosing which account to open. If someone wants to repatriate money outside India without any hassle, then NRE account is the best option. However, if someone wants to maintain an account only in INR currency, and pay taxes on the interest earned, then NRO account is the right choice.
Table difference between nre and nro
Here’s an example HTML table that outlines the differences between NRE and NRO accounts:
| NRE Account | NRO Account |
|---|---|
| Non-Resident External Account | Non-Resident Ordinary Account |
| Currency: INR or USD | Currency: INR only |
| Interest income is tax-free in India | Interest income is taxable in India |
| Funds can only be repatriated abroad | Funds can be both repatriated abroad and kept in India |
| Can be opened only by NRIs and PIOs | Can be opened by NRIs, PIOs, and foreign nationals of Indian origin |
| Accounts can be jointly held with another NRI/PIO | Accounts can be jointly held with another NRI/PIO or resident Indian |