Nre Vs Nro Account: Which Is Better For Nris?

By Author: Charli
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Understanding the differences between an NRE and an NRO account is crucial if you are a Non-Resident of India (NRI) earning money outside but still keeping assets in India. This blog will help you understand the differences between these accounts and which is better for NRIs.
What is an NRO Account?
NRIs can manage their income generated in India by opening a Non-Resident Ordinary (NRO) account, which is denominated in rupees. Rent, dividends, pensions, and other domestic income are all included in this. While withdrawals may only be made in Indian rupees, deposits can be made in both international and Indian currencies.
Although relief is available under the Double Taxation Avoidance Agreement (DTAA), interest is taxable in India and subject to Tax Deducted at Source (TDS). Subject to paperwork, the maximum amount of principal that can be repatriated in a fiscal year is USD 1 million.
What is an NRE Account?
NRIs can deposit their foreign earnings in India using a Non-Resident External (NRE) account, which is a bank account denominated in Indian rupees. While withdrawals ...
... are made in Indian rupees, deposits are made in foreign currencies and converted to INR. These accounts may take the shape of current, recurring, savings, or fixed deposits.
Without any issues or limitations, you may easily move your money from an NRE account to a foreign bank account. It is important to remember that the money you put into these accounts must have been earned outside of India.
You must also know that brokers and depository participants (DPs) provide NRIs with types of Demat account, which include repatriable and non-repatriable accounts.
Differences Between an NRO and an NRE Account

Particulars

NRO Account

NRE Account

Purpose

To deposit your revenue from India, an NRO account is ideal.

If you have relatives in India and want to cover their bills, you might want to open an NRE account.

Taxation

Tax-deductible at source (TDS) applies to interest generated in NRO accounts.

NRE accounts provide for tax-free deposits, which means both the principal and interest are not subject to taxes.

Repatriability

After paying relevant taxes, you can repatriate funds from the NRO accounts up to USD 1 million every fiscal year.

The principal amount and interest earned from NRE accounts are both freely and fully transferable.

Holding Structure

You and another NRI or resident Indian relative may jointly have an NRO account.

You can have a resident joint account holder only under the former or survivor mode of operation, or you can maintain an NRE account jointly with another NRI family member.

Exchange Rate Fluctuation Risk

No risk of currency fluctuations

Subject to losses from currency exchange

Withdrawals and Deposits

Allows deposits only in INR

Allows foreign currency deposits

Please note that, depending on your fund source and repatriation requirements, an NRI Demat account opening entails linking your investment profile to either your NRE or NRO bank account.
Final Thought
Even though an NRE and an NRO account differ in a few parameters, you will need both to manage your money as an NRI. Your foreign earnings benefit from an NRE account, and you may even send money back to your home country without restriction. Your revenue generated in India is kept secure and domestically with the use of an NRO account.