Difference between NRO vs NRE Account – Which One is Better?

By | July 16, 2018

Difference between NRO vs NRE Account: This is a little bit difficult to learn that which is better between the two. NRIs always get confused, as the opening method of NRE or NRO account is similar.

In India, NRI could select one of them for their savings account, by learning about both the accounts and its feature as well. It all about your specific needs and requirements based. NRIs opt for an NRE or NRO account is mainly formed for maintaining a Rupee account in India.

By the help of this option, maintaining a rupee account in India became in an easy manner. It also helps the NRIs to repatriate overseas earned money back to India and to keep India based earnings within India as well. And, there are two options available for an NRI for receiving these benefits:

  1. Non-Resident Rupee (NRE) account and
  2. Non-Resident Ordinary Rupee (NRO) account.

Difference between NRE and NRO accounts:

  1. Tax Treatment:

In India, NRE account holders have its funds are 100% tax-free whereas If NRO account holders fall into the income tax boundary, then in NRO account their the interest earned and credit balances are taxable. Another taxes i.e., wealth and gift tax must also be paid. For the interest earned in the NRO account and its credit balances, it must be imposed.

  1. Repatriation:

From NRE account, in both Principal and Interest earned, you can repatriate unlimited funds. After USD 1 Million net, there is a restriction which includes applicable taxes in a financial year with NRO account.

  1. Joint Holding:

A joint NRE account is permitted between two NRIs but it does not permit with a resident Indian. However, an NRO account holder has another option. It can be held jointly with an NRI and resident Indian as well. It suggested under Section 6 of the Companies Act 1956.

  1. Deposit of Rupee funds generated in India:

In India, any individual either he is an NRI (Non-Resident Indian) or PIO (Person of Indian Origin) or OCI (Overseas Citizen of India) is allowed to deposit funds in the respective NRO account whether the funds are generated from an income originating. But, this is not possible with the NRE account. So, in NRE account deposit of such earnings is not allowed.

Common Factor  between NRE and NRO accounts:

As we mentioned above, there are too many differences between NRE and NRO accounts, however, there are also some similarities between them below:

  1. Under the two i.e., NRE and NRO account, both Savings and Current Accounts can be opened.
  2. Secondly, the account holder must maintain an average monthly balance of Rs. 75000 in both NRE and NRO accounts.
  3. In India, both NRE and NRO account are helpful for those NRIs who have Indian Rupee accounts to maintain Indian Rupee account.

Benefits of NRE & NRO Accounts

You get the following benefits with each type of account:

With NRE account you –

  1. You can transfer your overseas earnings back to India converted to Indian Rupees;
  2. You also maintain savings in Rupee but keep them liquid;
  3. You can repatriate Rupee savings freely;
  4. can make a joint account with another NRI;

With NRO account you –

  1. You can open the account with resident Indian;
  2. You can deposit the income earned in India such as rent, dividends etc;
  3. You can save India based earnings in Rupees in India;

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