All Non-resident Indians whoare residing out of India have to open an NRE account because NRI’s who have an NRE account are only permitted to hold and maintain foreign currency earnings in Indian rupees and all the funds along with the accrued interest are freely repatriable and the interest that is earned is not taxable in India. An NRO account also lets the Non-resident Indian to maintain aRupee account in India.
Similar points to note between the NRE and NRO accounts
1.Repatriation – NRE account is freelyrepatriable i.e. the principal and the interest earned onthe other hand an NRO account has a limited repatriability i.e. permitted remittance is allowed from NRO is upto USD 1 million net of the applicable taxes inthe financial year after submitting an undertaking and a certificate from a chartered accountant .
2.Tax treatment – NRE account is tax-free which means there is income tax, wealth tax and gift tax in India on an NRE account. On the contrary the interest that is earned inan NRO account and all the credit balances are subject to respective income tax bracket and the gift tax and wealth tax are also applicable.
3.Deposit of rupee funds generated in India – If a Non-resident Indian (NRI) or a Person of Indian Origin (PIO) or an overseas citizen of India (OCI) is earning income originating in India which might be salary, house rent or dividends so on and so forth, he or she is only allowed to deposit into the NRO account. Such earnings are barred from being deposited into an NRE account.
4.Joint Holding – NRE account can be jointly held with another NRI but with not a resident Indian. On the contrary the NRO account can be jointly held with another NRI as well as a resident Indian which has to be a close relative as defined in the section 6 of the Companies Act 1956.
5.You can choose an NRE account if your primary reason is to park your overseas earnings remitted to India converted to Indian rupees or you want to maintain savings in Rupees and want to keep them liquid or you want to make a joint account with only another NRIor you want your rupee savings to be freely repatriable.
6.Go for an NRO account only when your primary reason is that you want to park India based earrings in Rupees in India, want your account to deposit income earned in India such as rent, dividends so on and so forth or you want to open an account with another resident Indian who happens to be a close relative.
Similar points to note between the NRE and NRO accounts
1.Repatriation – NRE account is freelyrepatriable i.e. the principal and the interest earned onthe other hand an NRO account has a limited repatriability i.e. permitted remittance is allowed from NRO is upto USD 1 million net of the applicable taxes inthe financial year after submitting an undertaking and a certificate from a chartered accountant .
2.Tax treatment – NRE account is tax-free which means there is income tax, wealth tax and gift tax in India on an NRE account. On the contrary the interest that is earned inan NRO account and all the credit balances are subject to respective income tax bracket and the gift tax and wealth tax are also applicable.
3.Deposit of rupee funds generated in India – If a Non-resident Indian (NRI) or a Person of Indian Origin (PIO) or an overseas citizen of India (OCI) is earning income originating in India which might be salary, house rent or dividends so on and so forth, he or she is only allowed to deposit into the NRO account. Such earnings are barred from being deposited into an NRE account.
4.Joint Holding – NRE account can be jointly held with another NRI but with not a resident Indian. On the contrary the NRO account can be jointly held with another NRI as well as a resident Indian which has to be a close relative as defined in the section 6 of the Companies Act 1956.
5.You can choose an NRE account if your primary reason is to park your overseas earnings remitted to India converted to Indian rupees or you want to maintain savings in Rupees and want to keep them liquid or you want to make a joint account with only another NRIor you want your rupee savings to be freely repatriable.
6.Go for an NRO account only when your primary reason is that you want to park India based earrings in Rupees in India, want your account to deposit income earned in India such as rent, dividends so on and so forth or you want to open an account with another resident Indian who happens to be a close relative.
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