A Non-Resident Indian or NRI often faces a situation where they need to maintain an account in India in Indian currency. There may be two reasons to open such an account. The NRI may want to repatriate the money earned in the foreign country back to India. Or the NRI may want to keep money earned in India in the country. NRIs can open a Non Resident Rupee (NRE) account, or a Non Resident Ordinary Rupee (NRO) account to do this. NRO accounts can also be opened by an Overseas Citizens of India (OCI), or Persons of Indian Origin (PIO).
NRE and NRO accounts’ similarities:
Both NRE and NRO accounts may be opened in Savings or Current accounts form, and are both Indian currency accounts. The average monthly minimum balance of Rs 75,000 needs to be maintained in both these accounts.
NRE and NRO accounts’ differences:
1. NRE accounts are repatriable freely, both the principal and the interest earned on it. However, the NRO account has a ‘restricted repatriability’. Remittance is permitted from NRO account up to net USD 1 million of taxes applicable in a financial year. This too is possible only after the account holder gives an undertaking, along with a certificate by a registered chartered accountant.
2. NRE accounts are free of tax in India. No income tax, gift tax, or wealth tax is applicable. The interest earned from NRO account and credit balance, on the other hand, is subjected to appropriate income tax brackets. Wealth and gift taxes are also applicable as a present.
3. If the income of the NRI originates in India, for example, salaries, dividends, rents, etc., they are allowed to deposit this in the NRO account only. Such deposits cannot be made in the NRE account.
4. NRE accounts may be held jointly with other NRIs, but not with another resident Indians. NRO accounts, on the other hand, can be held jointly with both NRI as well as another resident Indians.
With the above comparisons in mind, you can now choose the best option for NRI account for you. In short,
Choose NRE accounts if you:
• Need to keep your overseas income converted to Indian Rupees remitted to India.
• Need to maintain savings in Rupees, but in liquid form rather than as assets.
• Need to open a joint account with other NRI.
• Need your savings in Rupees to be freely repatriable.
Choose NRO account if you:
• Need to keep India based income in India in Indian currency.
• Need an account where income from India may be deposited.
• Need to open an account with a close relative who is a resident Indian.
NRE and NRO accounts’ similarities:
Both NRE and NRO accounts may be opened in Savings or Current accounts form, and are both Indian currency accounts. The average monthly minimum balance of Rs 75,000 needs to be maintained in both these accounts.
NRE and NRO accounts’ differences:
1. NRE accounts are repatriable freely, both the principal and the interest earned on it. However, the NRO account has a ‘restricted repatriability’. Remittance is permitted from NRO account up to net USD 1 million of taxes applicable in a financial year. This too is possible only after the account holder gives an undertaking, along with a certificate by a registered chartered accountant.
2. NRE accounts are free of tax in India. No income tax, gift tax, or wealth tax is applicable. The interest earned from NRO account and credit balance, on the other hand, is subjected to appropriate income tax brackets. Wealth and gift taxes are also applicable as a present.
3. If the income of the NRI originates in India, for example, salaries, dividends, rents, etc., they are allowed to deposit this in the NRO account only. Such deposits cannot be made in the NRE account.
4. NRE accounts may be held jointly with other NRIs, but not with another resident Indians. NRO accounts, on the other hand, can be held jointly with both NRI as well as another resident Indians.
With the above comparisons in mind, you can now choose the best option for NRI account for you. In short,
Choose NRE accounts if you:
• Need to keep your overseas income converted to Indian Rupees remitted to India.
• Need to maintain savings in Rupees, but in liquid form rather than as assets.
• Need to open a joint account with other NRI.
• Need your savings in Rupees to be freely repatriable.
Choose NRO account if you:
• Need to keep India based income in India in Indian currency.
• Need an account where income from India may be deposited.
• Need to open an account with a close relative who is a resident Indian.
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