What is the Difference Between NRE and NRO Account?

NRIs frequently require bank accounts in India for a variety of reasons. Some people want bank accounts in order to collect income produced in India, while others seek to invest money earned overseas in India. Additionally, holding Resident bank accounts becomes prohibited if a person becomes an NRI. Any existing bank accounts in non-resident rupees should be converted. In either case, NRIs must maintain Rupee accounts in India. NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts cater to this demand. Let’s compare NRE and NRO accounts. Also, let’s check what is the NRE and NRO accounts meaning.

But why do NRIs require two distinct types of accounts?

It’s critical to realise that NRE and NRO accounts are as distinct as chalk and cheese because they serve very different purposes.

These two categories are intended to help you separate and keep your profits earned outside of India from your earnings earned in India, making it easier to comply with tax laws and FEMA (Foreign Exchange Management Act) rules. You can choose the one that suits your financial requirements.

What is NRE and NRO account?

NRE and NRO accounts are Indian Rupee accounts reserved for non-resident Indians. These accounts may be opened at almost all Indian public and private bathes accounts are available as Savings, Current, or Deposit accounts. t’s look at the differences between NRE and NRO accounts for NRIs.

After you qualify as an NRI for tax purposes, you can create an NRE account. Existing Resident accounts, on the other hand, can be converted to NRO accounts when you become an NRI. It is your responsibility to notify the bank of any changes in your tax status. NRI Investment Opportunities in India

nro account and nre account

What are the similarities and differences between NRE & NRO accounts?

Yes, they have very few similarities. Both are NRI-only Indian Rupee accounts that offer the option of opening a Savings, Current, or Deposit account. Both of these accounts will only accept withdrawals in Indian Rupees. What is the difference between NRE and NRO accounts?

NRE Accounts vs NRO Accounts

NRE Accounts NRO Accounts
The full form of NRE account is Non Resident External Account. The full form of NRO account is Non Resident Ordinary Account.
It is an account used by non-resident Indians to transfer their foreign income to India.The purpose of an NRE account is to transfer cash earned outside of India to India on a repatriable basis. NRE can be kept or transferred to other Indian investments. It is an account used by non-resident Indians to handle their income in India.Rental income, interest income, pension income, and other income produced in India are held in an NRO account.
NREs are tax-free accounts. The interest produced on the monies in the accounts is likewise tax-free.Furthermore, regardless of the amount of money in your account, it is free of gift and wealth taxes. NRO accounts are taxable, and the applicable tax regulations are comparable to those that apply to Resident accounts. Money tax, wealth tax, and gift taxes are all relevant because these accounts are for income produced in India.
Two NRIs can open a joint account together.You can transfer funds from one NRE account to another, or from one NRE account to an NRO account or a Resident savings account. An NRI can open a joint account with an Indian citizen or another NRI.You can transfer money between NRO accounts and Resident savings accounts, but not between NRE accounts.
Deposits can be made in foreign currency and withdrawals can be made in Indian rupee.You can transfer any amount in any currency from your NRE account to any account outside of India. Deposits may be made in both international and Indian currency, and withdrawals can only be made in Indian currency.
Exchange Rate Risk is a real risk.Conversion loss and change in the value of the rupee against a foreign currency are risks associated with NRE accounts. NRO accounts are completely risk-free.The exchange rate is not at risk.

Is it better to create an NRE or NRO account?

So, based on your financial requirements, you should select the appropriate account. Both of these accounts have distinct purposes.

Here are some pointers to Choosing an NRE account:

  • You wish to send your foreign profits to India and keep them in rupees.
  • You intend to invest in Indian markets that can be repatriated.
  • You’d want to establish a joint account with another NRI.
  • You want an account that allows for free currency repatriation.
  • Than, You expect to repatriate more than a million dollars.

Choose an NRO account if:

  • To get your money in India, you’ll need an account.
  • You wish to keep your Indian earnings in Indian Rupees and have no intention of using them in your own nation.
  • You’d want to create a joint account with a Native American. If you want your Indian profits to be quickly available to your family back home, this option is really handy.


Choosing the correct account to meet one’s financial needs may make all the difference in the world. Keeping in mind the characteristics that distinguish an NRE account from an NRO account, it would be beneficial if you could assess your needs before deciding between the two accounts. However, because both of these accounts were created with an NRI’s financial requirements in mind, they will definitely provide an easy and safe way to handle cash from around the world.

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