What is NRE Account - Difference Between NRE and NRO

With so many different types of products and accounts available in the market, you can find yourself a little confused and hassled as to what product to opt for. Knowing better about the many available choices can help you make an informed decision. It also helps if you are able to differentiate between the various available avenues. That way, you can better choose for yourself where to invest all your hard earned money. You can generate better returns on your money, based on your preferences and requirements.

Non-Residential External (NRE) and Non- Resident Ordinary (NRO) Accounts are the two major categories of accounts available for you, as an NRI. They happen to be amongst the most popular options if you wish to save money in India.

What is the difference between NRE and NRO Accounts?

The following table summarizes the difference between NRE and NRO Accounts-

Basis	NRE Accounts	NRO Accounts
Definition	An account that helps you park your foreign earnings in India, in Indian denomination.	An Account that helps you park your earnings from India in Indian Denomination.
Taxation	Deposits in NRE accounts are Tax-Free, i.e. the principal amount, and the interest earned thereon, is exempt from tax.	The interest earned in NRO accounts is subject to TDS or Tax deductible at Source.
Repatriability i.e. Transferability	Money from NRE accounts is freely repatriable i.e. both the Principal amount and interest earned are freely and completely transferable.	Funds from the NRO Accounts can be repatriated post payment of applicable taxes with a limit of USD 1 million in a financial year.
Suitable Conditions	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. These earnings could include rent, income, dividend, sale of Property etc.
Holding Structure	You can open an NRE account with another NRI and close relative Resident Indian.	You can open an NRO account with an NRI as well as any Indian resident.

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You can read more on the different types of NRI Accounts here.

* 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.