Difference between NRE and NRO Accounts (2024)

FAQs

Difference between NRE and NRO Accounts? ›

An NRE account can be used as a bank account to transfer foreign earnings to India in Indian rupees. An NRO account can be used as a savings account to manage the income earned in India by an NRI in Indian rupees. This can include pension, rental income, dividend income, etc.

An NRE account can be used as a bank account to transfer foreign earnings to India in Indian rupees. An NRO account can be used as a savings account to manage the income earned in India by an NRI in Indian rupees. This can include pension, rental income, dividend income, etc.

You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.

Yes, an individual can open both NRE and NRO accounts to meet his needs. If you have any income arising in India, you can receive it in NRO account, and if you want to park your earnings abroad in India, you can open an NRE account.

Having an NRE or NRO account is necessary if you want to invest money in India or to collect the income generated in India in INR once you become an NRI. NRO (savings/current) account can be opened for the purpose of putting through bona fide transactions denominated in INR.

Another question you may have is- can I deposit money in NRE account from India? You cannot transfer money to a NRE account from a savings account in India. However, you can transfer money from NRO to NRE account. You can also transfer money from one NRE account to another.

Limitations of NRO Accounts

One of the major disadvantages of an NRO account is the cap of USD 1 million on the repatriation of funds. Moreover, the interest income of an NRO account is also subject to taxes.

The account holder can withdraw money from his/her NRE account. Other than that, his/her family members, or whoever has access to the account in India can withdraw money. This type of account is most commonly used because countless NRIs send money to their families in India.

A Non-Resident External (NRE) account helps an NRI store their foreign currency savings in an Indian bank. Using an NRE account, an account holder can deposit money in any foreign denomination and withdraw it in INR (Indian Rupees).

This account allows you to receive funds in either Indian or foreign currency. However, only Indian currency can be withdrawn as NRO Accounts are kept in Indian currency and cannot be freely repatriated into any foreign currency.

Can I transfer money from USA to NRO account? ›

Funds originating from a foreign country (foreign currency) can be deposited in both NRE and NRO accounts. However, funds originating in India i.e. in Indian Rupees or INR can be deposited only in NRO Accounts and not an NRE Account.

Interest in an NRE account is not taxable in India. However, Interest on the NRO account is taxable in India and will be liable for TDS. As per FEMA rules, the penalty for not converting a resident account to an NRO account is up to 3 times the amount in the account or INR 2 lakh when the sum is not quantifiable.

Can NRIs transfer funds from NRE to NRO Account? YES! NRIs can transfer funds from their NRE (Non Resident External) Account to their NRO (Non Resident Ordinary) Account. An NRE account allows you to transfer funds to another NRE account as well as an NRE to NRO fund transfer.

Deposits made in foreign currencies in an NRE account are subject to conversion into Indian rupees. Hence, such deposits might fluctuate in value due to appreciation of domestic currency (or depreciation of foreign currency), thereby incurring losses during repatriation.

The accounts can be opened as savings and current account and the currency is in Indian rupee. It is mandatory to maintain a minimum of INR 75000 in both NRE and NRO account.

While there is no restriction on the NRE account limit, only a few specific types of credits are allowed. These include: Inward remittances from other foreign currencies, as permitted by the RBI. Interest accruing on the funds deposited in the account.

Once you come back to India permanently, you are a resident as per FEMA. And residents are not permitted to keep a NRE account. Interest on NRE FD is tax exempted only for Non-Residents. Therefore from the day you come back to India any interest earned in NRE FD becomes taxable in your hand.

NRO accounts have limited access for repatriation. An NRO account restricts you from remitting more than USD 1 million inclusive of taxes during an assessment year. You can repatriate the interest amount freely, but the principal amount can be repatriated only within set limits.

How much money can I deposit in NRO account? ›

The interest income on funds in an NRO account is subject to tax deducted at source (TDS). A 30% tax on the NRO account, in addition to the applicable cess and surcharge, is levied on the interest income from these accounts.

* Please note that the debit cards linked to NRE accounts can be used across the world. However, the debit cards which are linked to NRO accounts are non-chip based and can be used only in India and for domestic online transactions initiated on merchant website(s) based in India.

Cash withdrawal limit of Rs. 25,000 per day and transaction limit (w.e.f. October 1, 2011) of Rs. 50,000 per day at merchant establishments.

There are several ways in which you can transfer money to your NRE savings account. You can use wire transfers or money transfer services offered by your bank. You can do a transfer through by depositing or mailing foreign currency cheques and demand drafts.

An NRE account can only be opened by a person of Indian Origin or a person who has become a non resident under FEMA.

Any amount which is remitted to India from abroad through proper banking channel can be credited in the NRO account. NRI can deposit foreign currency upto $5,000, while in India, duly supported by currency declaration form. Money can also be transferred to NRO account from NRO account of any other NRI.

Non-Resident Ordinary (NRO) Rupee Account can be opened and maintained by an NRI, PIO or Foreign National with an Authorised Dealer for the purpose of putting through bona fide transactions denominated in Indian Rupees not involving any violation of the provisions of FEMA, rules and Regulations made there under.

How to bring money from India to USA after selling property? ›

Prior to transferring funds from India to the US you'll need to complete Form 15CB, and your bank will ask you to provide proof of the source of the money, such as a copy of the property sale agreement.

Updates on foreign remittance tax India

In the 2023-23 Budget address, Finance Minister Nirmala Sitharaman announced that the Tax Collection at Source (TCS) for foreign remittances would increase from 5% to 20% of the transaction amount.

NRIs in USA can open an NRI account online or by visiting any of the bank branches. NRIs in USA can open ICICI NRE, NRO, FCNR, RFC accounts.

The Reserve Bank of India allows the transfer of funds up to USD 1 million a year from an NRO to an NRE account.

Do I have to Pay Taxes In the USA for the interests earned? The simple answer is yes. You would need to pay taxes on the interests earned on your NRE or NRO accounts.

Penalties for not converting to NRO account

Under the Act, any individual who fails to adhere to the guidelines is liable to pay a penalty of up to 3 times the amount involved in the existing resident savings account or Rs 2 lakh when the sum is not quantifiable.

It is essential for an NRI to open Non-Resident External (NRE) or Non-Resident Ordinary (NRO) Account, to do any banking transactions in India. However, depending upon the transactional requirements of the NRI/PIO, he/she can decide to open either an NRE or NRO Account, or even both.

The NRE funds can be repatriated only to customers' own/self-account abroad. The beneficiary's name should be same as per name of the account holder. Repatriation of funds to third party is not allowed under this option.

NRE accounts do not have a limit on repatriation and the interest earned is tax-free in India. An NRO account, in contrast, has a limit of $1 million on remittances outside India in a financial year. Are you interested in opening NRI accounts remotely?

What happens if NRE account is not closed? ›

You should convert/re-designateor close your NRE account after the return, on a priority basis. If you fail to convert your NRE account within 3 months of the return, it will be considered as a violation of Foreign Exchange Management Act (FEMA) and attract a penalty.

You should opt for NRE Accounts if you want to hold or maintain your overseas earnings in Indian currency. NRE Accounts are also suitable if you wish to keep your savings liquid. You should opt for NRO Accounts if you want to save your earnings from India in Indian currency itself.

Can an NRI maintain multiple accounts with different banks in India, simultaneously ? Ans.: Yes, there is no prohibition to open and maintain multiple accounts a/cs.

You can use an NRE bank account to store foreign currency converted to Indian rupees, while an NRO account is used to keep both foreign income and money earned in India. NRO accounts have a limit for repatriation up to USD 1 million per financial year, but NRE accounts have no such limit.

NRE Account Benefits:

NRE accounts are exempt from tax. This means that both, the principal amount and the interest you earn is free from tax. You are also free to repatriate the principal and the interest amount without any restrictions. Repatriation means transferability.

Interest in an NRE account is not taxable in India. However, Interest on the NRO account is taxable in India and will be liable for TDS.

Cash withdrawal limit of Rs. 25,000 per day and transaction limit (w.e.f. October 1, 2011) of Rs. 50,000 per day at merchant establishments.

A person can have an NRE account as long as one is a non-resident under the provisions of Foreign Exchange Management Act (FEMA). A non-resident becomes a resident under FEMA as soon as he comes back to India for good or for an indefinite period.

Do I have to pay tax on money transferred from India to USA? ›

No, the money transferred to US from India is not taxable. But, if it exceeds US $100,000 for any current year, you must report it to the IRS by filing Form 3520. This is just an informational form with no taxes payable. However, if the money is in form of gift, gift taxes in the US may be applicable.