The difference between NRE and NRO accounts is clear from their names. NRE stands for non-resident external and NRO stands for non-resident ordinary. The NRE account allows you to deposit foreign currency, which is kept in Indian rupees. The NRO account allows you to deposit Indian currency, which is kept in Indian rupees.
If you are not a permanent resident of India, you cannot use your Resident Savings Account abroad. To manage your finances in India, you need to open NRI accounts. Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts are the two main accounts available to you as an NRI. These are the two most popular options if you want to save money in India.
NRE Account
The full form of NRE is non-resident external account. This is a way for NRIs to invest their foreign income in India. This account is fully refundable and tax-free in India. Balances are in Indian Rupees. NRE accounts can help you manage foreign income efficiently along with earning interest.
NRO Account
The full form of NRO is Non-Resident Ordinary Account. NRIs use it to manage their income from India, such as rent, dividends, or pensions. NRO balances are partially repayable and the interest earned is taxable in India. This makes it suitable for internal revenue management. Balances are in Indian Rupees.
The Difference Between NRE and NRO Accounts
| NRE Account | NRO Account | |
| Meaning | An account that enables foreign income to be invested in India, in Indian value. | An account that helps you invest income from India in Indian Value. |
| Tax | Investments in NRE accounts are tax-free, i.e. the principal and interest earned on it are exempt from tax. | The interest earned from NRO accounts is subject to TDS or tax deduction at source. |
| Repatriability means transferability. | Money from NRE accounts is freely repayable, which means that the principal and interest can be transferred freely and in full. | Funds from NRO accounts are non-repatriable after payment of applicable taxes amounting to less than US $1 million in a financial year. |
| Suitable conditions | If you want to keep or retain your foreign income in Indian currency, you should opt for NRE accounts.NRE accounts are also suitable if you want to keep your savings liquid. | If you want to save your income from India in Indian currency, then you have to choose NRO accounts. This income can include rent, income, dividends, property sales, etc. |
| Structure of holding | You can open an NRE account with another NRI and a close relative who is an Indian. | You can open an NRO account with any Indian resident and NRI. |
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