Many NRIs are often faced with the situation of maintaining a Rupee account in India. There
are two options available with NRI interested in opening bank account in
India - NRE or NRO account. Read this space to know the difference
between these two accounts and know when to choose what account.
A Non-Resident Indian is often faced with the situation of maintaining a
Rupee account in India. Primarily there are two reasons for opening
such account: NRI wants to repatriate overseas earned money back to
India and/or NRI wants to keep India based earnings in India. NRI has
the option of opening a Non Resident Rupee (NRE) account and/or a Non
Resident Ordinary Rupee (NRO) account. An NRO account can also be opened
by a Person of Indian Origin (PIO) and an Overseas citizen of India
(OCI).
Similarities between NRE and NRO accounts:
Both accounts can be
opened as Savings as well as current accounts and are Indian Rupee
accounts. One needs to maintain an average monthly balance of Rs 75000
in both NRE and NRO accounts.
The Differences between NRE and NRO accounts:
1. Repatriation:
NRE account is freely repatriable (Principal
and interest earned) while the NRO account has restricted repatriability
i.e permitted remittance allowed from NRO is up to USD 1 million net of
applicable taxes in a financial year after giving undertaking along
with a certificate from a chartered accountant.
2. Tax Treatment:
NRE
account is Tax free (no Income tax, wealth tax and gift tax) in India.
On the other hand the interest earned in NRO account and credit balances
are subject to respective income tax bracket and are also subject to
applicable wealth and gift tax.
3. Deposit of Rupee funds generated in India:
If an NRI/PIO/OCI is earning income originating in India (such as
salary, rent, dividends etc.) he/she is only allowed to deposit it in
NRO account. Deposit of such earnings is not permitted in NRE account.
4. Joint Holding:
NRE account can be jointly held with another NRI but
not with resident Indian. On the other hand NRO account can be held with
NRI as well as resident Indian (close relative) as defined under
Section 6 of the Companies Act 1956.
Choose NRE accounts if you:
(Primary reason) want to park your overseas earnings remitted to India
converted to Indian Rupees; want to maintain savings in Rupee but keep
them liquid; want to make a joint account with another NRI; want Rupee
savings to be freely repatriable.
Choose NRO account if you:
(Primary
reason) want to park India based earnings in Rupees in India; want
account to deposit income earned in India such as rent, dividends etc;
want to open account with resident Indian (close relative) read more.