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5 Differences between NRO and NRE Accounts an NRI needs to know!

NRO and NRE accounts enable an NRI to hold a rupee account and conduct transactions between foreign countries and India without too many hassles. Here’s what you need to know about the difference between these two accounts:

1.      Definition 
NRO or Non-Resident Ordinary Account is an account that helps an NRI in managing the earnings from India in Indian denomination. He also has the option to open a joint NRO account with one or more NRIs or Indian citizens.NRE or Non-Resident External Account is an account that helps you transfer your foreign earnings in India, in Indian denomination. However, an NRI can only open a joint NRE account with another NRI only.

2.      Tax Implication
In NRO accounts interest is taxable under the Indian Income Tax Act. However, NRIs can take the benefit of DTAA guidelines by submitting the requisite documents. Deposits in NRE accounts are Tax-Free, i.e. the principal amount, and the interest earned thereon is exempt from tax.

3.      Reparability
NRO accounts have repatriation in only for current income up to USD 1 million per financial year. Money from NRE accounts is freely repatriable i.e. both The principal amount and interest earned are freely and completely transferable.

4.      Exchange Rate Risk
In case of an NRO account, if the deposit as well as the withdrawal is made in INR, there is no exchange rate risk involved; whereas, in case of an NRE account, currency fluctuations make you prone to exchange rate risks.

5.      Suitability
NRO Accounts are suitable if an NRI wants to save his earnings from rent, income, dividend, sale of Property etc. from India in Indian currency itself. NRE Accounts can be opened by an NRI if he wants to hold or maintain his overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid.


The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. We strongly recommend you to seek professional help pertaining to your queries and doubts. 

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