An Non-Resident Indian (NRI) or Overseas Citizen of India (OCI) who earns money both abroad and/ or in India often finds it challenging to manage finances across different tax jurisdictions. For NRIs and OCIs who reside outside India, Non-Resident External Account (NRE) and Non-Resident Ordinary (NRO) bank accounts are a viable option for holding tax-sheltered savings or current accounts within India. These types of accounts can be beneficial to NRIs/ OCIs in two ways:

  • Transfer foreign earnings to India at any time to rupee-denominated accounts
  • Keep income earned within India (via any assets), while residing overseas

Non-Resident Rupee (NRE) Account

The NRE account is an Indian rupee-denominated account with any bank in India. These accounts can be in the form of savings, current, recurring, or fixed deposits. The foreign currency deposited into the account is converted to INR. The account holder can transfer funds (principal and interest) from an NRE account to a foreign account with no complications or restrictions. Any deposits made into an NRE account must be earned outside India.

  • The primary benefit of an NRE account is it is tax-free (no income tax, wealth tax, or gift tax) in India
  •  An NRE account is best suited for overseas savings which have been remitted to India by converting the foreign currency into INR

Non-Resident Ordinary (NRO) Account

An NRO account is a savings or current account held by NRIs/ OCIs in India to manage their income earned within the territory of India. Account holders can easily deposit and manage their accumulated rupee funds. Funds can be received in either Indian or foreign currency in the NRO account. An NRO account can be held jointly with another resident Indian or an NRI/ OCI.

  • Income which is deemed to accrue or arise in India can only be deposited in this type of account (e.g.  income from Rent, Dividend or Commissions)
  • The interest earned in this form of account is taxable in India (subject to Tax Deducted at Source)

NRE and NRO bank account

Choose an NRE account, if you:
  • want to park your overseas earnings remitted to India converted to Indian
  • want to maintain savings in Rupee but keep them liquid
  • want to make a joint account with another NRI
  • want Rupee savings to be freely repatriable
Choose an NRO account, if you:
  • want to park India based earnings in Rupees in India
  • want account to deposit income earned in India such as rent, dividends etc
  • want to open account with resident Indian (close relative)

By Deckard

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