“Which account should I open?” is the first question that crosses the mind of a NRI who wants to open an account in any of the Indian banks. There are specifically two kinds of accounts that NRIs can opt for in India – NRO (Non-Resident Ordinary) and NRE (Non-Resident External).
Both these accounts provide different features and facilities. The choice of opening either of these strictly depends on your need/purpose. All prominent banks across India offer the facility to open both these accounts as per your requirement.
A few prime differences between an NRE and NRO account are:
Mode of deposit – The initial difference between NRE and NRO account lies in the mode of deposit. You can only deposit foreign currency in an NRE account while only Indian rupees can be can be deposited in an NRO account.
The difference in taxation – An NRE account in India is tax-free. On the other hand, the credit balance, as well as the interest earned in a NRO account, falls both under the specific income tax bracket which is 30% as per the Income Tax Act 1961, as well as wealth and gift taxes as applicable.
Joint account holding – NRE accounts can jointly be held with another NRI, but you cannot hold one with a non-resident Indian. An NRO account can be held both with an Indian resident as well as an NRI as Section 6 of the Companies Act 1956 states.
Deposition of rupee fund generated in India – Earnings of an Indian like rent, salary, dividends etc. is strictly allowed to be deposited only in an NRO account. An NRE account does not permit the deposition of such income.
An NRE account is a rupee-denominated. You can only make a deposit in the can only be made through inward transfer of funds. Deposits are compulsorily made through foreign currencies, which get converted into Indian rupee during the deposition process. The rate of interest to be paid is determined by the bank itself.
In case of an NRO account, NRIs are free to convert their existing savings account into an NRO one, with just their status being changed from a resident to a non-resident.
If the bulk of your net income is accumulated in India and you wish to take care of it in the country itself, you can always choose to apply for an NRO account. Nonetheless, an NRE account is the best option when it comes to transferring foreign income to India and evading any kind of tax liabilities for the same.
Both these accounts provide different features and facilities. The choice of opening either of these strictly depends on your need/purpose. All prominent banks across India offer the facility to open both these accounts as per your requirement.
A few prime differences between an NRE and NRO account are:
Mode of deposit – The initial difference between NRE and NRO account lies in the mode of deposit. You can only deposit foreign currency in an NRE account while only Indian rupees can be can be deposited in an NRO account.
The difference in taxation – An NRE account in India is tax-free. On the other hand, the credit balance, as well as the interest earned in a NRO account, falls both under the specific income tax bracket which is 30% as per the Income Tax Act 1961, as well as wealth and gift taxes as applicable.
Joint account holding – NRE accounts can jointly be held with another NRI, but you cannot hold one with a non-resident Indian. An NRO account can be held both with an Indian resident as well as an NRI as Section 6 of the Companies Act 1956 states.
Deposition of rupee fund generated in India – Earnings of an Indian like rent, salary, dividends etc. is strictly allowed to be deposited only in an NRO account. An NRE account does not permit the deposition of such income.
An NRE account is a rupee-denominated. You can only make a deposit in the can only be made through inward transfer of funds. Deposits are compulsorily made through foreign currencies, which get converted into Indian rupee during the deposition process. The rate of interest to be paid is determined by the bank itself.
In case of an NRO account, NRIs are free to convert their existing savings account into an NRO one, with just their status being changed from a resident to a non-resident.
If the bulk of your net income is accumulated in India and you wish to take care of it in the country itself, you can always choose to apply for an NRO account. Nonetheless, an NRE account is the best option when it comes to transferring foreign income to India and evading any kind of tax liabilities for the same.
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