Difference Between NRE and NRO Accounts: Which Savings Account Should You Choose?
July 06, 2024
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.
