Harshal Dhote
NRE is Non Resident External and NRO is Non Resident Ordinary bank accounts, Which NRI’s (Non Resident Indians) need to open in Indian banks to manage there income in India and Abroad.
There are many benifts of having these accounts to NRI’s.
NRE (Non Resident External)Account:
- This account is for depositing or transferring the income earned outside India
- Rupees from India can not be deposited in NRE account, only foreign currency can be deposited which will be converted into Indian Rupee at the time of deposit
for example. If you are staying in UK, you can transfer GBP(pounds) after converting in ruppes to NRE account by various transfer methods (web sites like transferwise/Xendpay or banking services) - Banks will provide interest for the amount in NRE account. Interest rates for NRE accounts will be equal or bit more than normal saving accounts in India
- The interest earned on the money in NRE account is tax free
- In NRE account you can make Fixed Deposit as well, again the interest earned on Fixed Deposit in NRE account is tax free
- Money from NRE account can be transfered to your NRO account, your friends and family accounts and can be withdrown from ATM’s
- The base line is, NRE (Non Resident External) account is to transfer money earned abroad to India and Interest earned on the money in NRE account is tax free
NRO (Non Resident Ordinary)Account:
- NRO account is the account held by NRI’s to manage income earned in India while they are abroad, like house rent, pension, or income from any other business in India
- NRO account can be Saving or Current, It is similar to Saving or Current account for Indian resident
- Once you move out of India (when status changes from resident to non-resident Indian i.e when you spent more than 6 months abroad in one stretch ) you need to convert your saving or current account in India to NRO as per government of India guidelines. This can be done from Abroad as well over phone, no need to go to bank in person
- In case you are back to India permanently you need to convert the NRO account again in to normal saving or current account
- Money in NRO accounts is taxable, income tax, wealth tax and gift tax apply to this account
- Interest earned on the money in NRO account is also taxable
- You can deposit money from Abroad to NRO account like in NRE account but money in NRO account is taxable
- Withdrawals from both NRE and NRO accounts can only be made in INR
As per FEMA (Foreign Exchange Management Act) regulations, holding resident Saving or Current account in India is illegal for NRI
you need to convert your resident saving/current account in India to NRO account. If you continue to use your resident saving/current account, you might incur huge penalties.
Opening NRE/NRO account or converting your existing saving/current account in to NRO is very easy, you just request for it in your choice of bank (SBI, ICICI, Yes Bank, HDFC, CITI) online or over the phone.
Bank representatives will chase you after that and guide you to fill the form and documents required. Bank will also manage pickup of documents from your place for free and your account will be opened in a week.
hope the information is useful to you and serves for all your queries.
