Saturday, July 28, 2012

NRE or NRO Savings Account – Which one NRI should open? Differences

NRE or NRO savings account, which should I open is first doubt comes in mind of any Non Resident Indian (NRI), who wants to open saving accounts in India on Indian banks like ICICI bank, SBI bank, HDFC Bank, Kotak Mahindra Bank and several other public sector banks which offer this facility like Bank of Baroda. NRE and NRO are two kinds of accounts any NRI can open in India, NRE stands for Non Resident External while NRO stands for Non Resident Ordinary account, though both can be held by Indians there are many differences between them and based upon your need you need to choose to open either NRE or NRO account in India. Almost all major banks both public sector and private sector like SBI, HDFC, ICICI, Kotak Mahindra allow NRI Indian to open both NRE and NRO account.



Difference between NRE and NRO account for NRI Indians

Now let's see some differences between NRI and NRO account in India

1) The first difference between NRE and NRO account is how you deposit money. Only foreign currency can be deposited into NRE account while you can deposit Indian rupees in NRO account.

2) Interest rates on NRE and NRO accounts could differ currently many banks provide almost same interest rates on NRE and NRO accounts


3)Another significant difference between NRE and NRO account is that Money in NRE account is tax-free while its taxable in NRO account if you are maintaining any NRI fixed deposit in your NRE account then both interest and principle are tax-free while in case of NRO account interests are taxable.

4) If you are generating money from rents than you need to have an NRO account because INR currency can not be deposited into NRO account.

5) Once the money is in your NRE account you can transfer Indian Rupees (INR) to other accounts in India including NRO accounts. IF you are thinking to open NRE or NRO accounts choose banks like HDFC, Kotak Mahindra, and ICICI which has better customer support and net banking facilities.


6) If you want to send money abroad from India, NRE account can be better choice than NRO account which imposes a limit on how much amount you can transfer from India to abroad.

If you are now looking for what is the best bank to open NRE and NRO account, please check out that article, it compares three major privates banks HDFC, Kotak and YES bank on various factors which are important for NRI e.g. service, convenience, interest rates and support.

Here is a nice diagram to summarize difference between NRE and NRO savings accounts:


NRE or NRO savings account, which one NRI should open





Frequently asked Question on NRE and NRO Account:

Here is a list of some of the common doubt among NRI customers related to NRE and NRO account with Indian banks :


1) Can I open both NRE and NRO savings Account in India ?
Yes you can open both NRE and NRO Savings account with one name, there is no restriction on that.


2) Does interest earned on NRE and NRO Savings account is Tax Free ?
Interest on NRE Savings Account is tax-free but on NRO savings account you need to pay tax much like any other Saving account in India.


3) Can I open NRE and NRO account in one Bank?
Yes, you can open both NRE and NRO account in the same bank. If you already have a resident saving account with any bank e.g. ICICI then just inform them about your NRI status and they will convert your resident saving account into an NRO (Non Resident Ordinary) account.


This is what I know about NRE and NRO account and what difference between them. There could be some more, if you know then please post as a comment. This will be a good reference point for any NRI Indians who are looking forward to opening NRE or NRO savings account in India. Even if you are thinking to open both NRE and NRO which is a good idea, Its beneficial to know limitations of your NRO savings account and what operations you can do and which transactions are not possible with NRO or NRE savings account.

37 comments:

  1. Great comparison, I also want to highlight another important difference between NRE and NRO account is that you can deposit INR into NRO account but not on NRE, which makes NRO better option for saving rental income because you need to pay tax on that while in NRE accounts you don't need to pay any Tax in India.

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    Replies
    1. Is it required to furnish a proof of source of funds for depositing rental income into NRO account?

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    2. I guess No, given rental income is always in INR, you can deposit them into NRO account or ask the tenant to online transfer the rent into your NRO saving account.

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  2. well there are lot's of restriction on NRO savings account as compared to NRE accounts. You can not transfer money (Indian Ruppees) from NRO savings account to NRE Savings account, doesn't matter if you hold both NRE and NRO savings account and its on the same bank or its held by another NRI. NRO accounts are mostly for saving Income earned on India through different medium like Income earned from Rental property, Income earned by selling Securities or Stock e.g. short term and long term capital gains, Interest earned on other Fixed deposit e.g. Company Fixed deposit or other NRO fixed deposits. You also need to pay a tax of over 30% around 30.9% on interest earned by NRO Fixed deposit. You can not send money to your abroad account from NRO except interest earned which can be repatriate upto 1 Million USD. So Given this restriction I think You should open both NRE and NRO Savings account because they both server different purpose. NRE Saving account can be used to store and invest your offshore income in Indian Rupee and take advantage of higher interest available on India, NRE Saving account can also be used as primary channel to send USD, GBP, EURO, SGD or any other foreign currency to India and convert them into Indian Rupees. NRO Account can be used to store income earned in India and it can also be jointly owned by your relatives like Mother, Father or any family member which allows them to access funds anywhere in India. Use NRO account to keep rental income and dividend earned from Stocks

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    Replies
    1. thanks so much. very helpful

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    2. Thanks for the note and I had a question. If I open an NRO acccount jointly with my parents and if they spend substantial amount from the same on a regular basis, would it be subject to scrutiny or because the income source is coming from a NRI, the local residents wont be subject to any scrutiny of income source?

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  3. What is difference between HDFC NRO Savings account and ICCI NRO Savings account ? Can you please provide a comparision between ICICI vs HDFC NRO Savings accounts ? I have shortlisted ICICI bank, HDFC bank and SBI but not able to decide between first two. I think ICICI vs HDFC is a tough call, please help.

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  4. Thanks for these differences. If anybody is thinking about opening NRE or NRO or both accounts, I've posted my own experience here HDFC NRE & NRO Account Review.

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  5. I think there is a typo in point 4 -- it should be " INR currency can not be deposited into NRE account." (not NRO as stated)

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    Replies
    1. I also noticed that. I was confused before I read your comment. Now all good.

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    2. Yes,,,
      plz correct it

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  6. What is difference between Citibank NRE and NRO Account in India ? Can I open a citibank NRE or NRO account from USA itself ?

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    Replies
    1. Difference between nre and nro a/c remains the same for all banks irrespective of the bank.Yes you can open Citibank NRE/NRO A/c from USA as well. You can go to the below link for further details.
      You can live chat with them as well.This is a great bank with best in class service.
      https://www.online.citibank.co.in/citi-nri.htm?eOfferCode=INHONRIBTTNNRIB

      Delete
  7. This comment has been removed by the author.

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  8. I like your blog post. Keep on writing this type of great stuff. I'll make sure to follow up on your blog in the future.

    NRE Account Interest Rates

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  9. NICE ARTICLE...I still have one question unanswered...if I transfer Indian Rupees between my NRE accounts of 2 different banks, is the interest or any amount subject to Tax?

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    Replies
    1. No, money kept on NRE accounts both saving and fixed deposit are tax free. Since you can only transfer foreign currency to NRE accounts initially, it's ok even if you transfer rupees from one NRE accounts to other. No interest will be charged.

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  10. Can I transfer money from my indian current account to nro account from same bank thru cheque ?

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  11. I wish to transfer inherited amount from my late father to my NRO a/c which is in ICICI bank. Presently the amount is credited / lying in the SB a/c of my brother (residing in India). Can I get it transferred directly in my NRO a/c or some legal formalities are to be performed?

    ReplyDelete
    Replies
    1. Hello Sir
      I am Ravi from IndusInd bank India.
      if you really want to open your NRE/NRO/FCNR/PIS
      So please call me. +918928901001
      rahangdale.ravi@indusind.com

      Service is my priority…. believe me

      Regards
      Ravi Rahangdale
      +91 8928901001

      Delete
  12. A very Informative Article. Great comparison

    NRE::NRE deposits are emerging as an attractive investment option, according a report in the Business Standard today.
    NRO::You can keep your funds in rupee denomination here as well. Unlike an NRE account, with an NRO account your repatriation is allowed only under specific conditions

    saverable.com

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  13. Hey Guys, Can you suggest me which bank would be preferd for NRI banking? Had gone through IDBI Bank NRI service or some other bank. As IDBI Bank offers basic NRI banking products like Non Resident Rupee Checking Account, Non Resident Rupee Term Deposits and Foreign Currency Non Resident Deposit. www.idbi.com/nri-banking.asp url for you to suggest me on this basis.

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  14. Hey Guys, What if i withdraw money from NRE account or close NRE account. Will those money be converted in which from is funded or Will it be converted to foreign currency or it will remain in INR?

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  15. I came across this excellent blog. Nice comparison. I have a specific question. I am selling a house in India that I inherited and would like to repatriate the money back in US. To conduct this transaction, I also need to visit India for which I would need INR for my expenses there.
    1) What is the best option for me - to open NRE or NRO or both?
    2) Would I be able to deposit money gained from the sell of the home in the NRE account even if that means first converting INR into dollars first? What are the implications of repatriation of money from NRO account, if at all possible?

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  16. What are the charges if any to close NRE SB Account with one bank and transfer to another Bank?

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    Replies
    1. It depends to bank and varies between bank. I believe you don't need to pay any charge for closing account, provided you open another account with other bank and then transfer your amount and then close your first NRE account, this would be more convinient. If you first close the NRE account, you will get your money either by DD or Cheque and I am not sure if you can deposit it to the other bank's NRE account because only way to fund an NRE account is either by foreign currency or transffering fund from another NRE account.

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  17. I have a problem regarding repatriation of money to a bank in Canada. Due to certain problems I can not visit india but want the money lying in an nro account Transferred to canada.Any wayout?

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    Replies
    1. Hello Jitender, if you have online username and password details, I think you should be able to repatriate the money back to Canada, depending upon which bank you have your NRE account, for NRO account I dont think it allows you to repatriate money, Please check with your bank.

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  18. My cousin has come from Qatar to India to study. He has been born and brought up in Qatar itself. He has a NRE account at Bank of India but intends to close it due to bad service. Now since he will be staying here for 3 years should he:
    1. Open a NRO savings account or a basic savings account?
    2. Can he withdraw money for his expenses whenever required?
    3. Can he transfer the money from his Bank of India NRE savings account to the new account?
    4. When taxed how does he file a tax return?

    PLEASE HELP!!!!

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  19. hai,
    I am opened the NRE and NRO account in india SBI bank and they given Internet banking also both NRE and NRO linked same user name and password ok, now NRE balance is zero and NRO having money. the problem is when i click the money transfer option only NRO account showing NRE not showing what is the problem. the problem is the NRE having zero balance ? it was new account

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  20. Can anyone help me what is the procedure to convert NRE account to NRO?

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    Replies
    1. I think the simplest way to close the NRE account and open a new NRO account, if you don't want to go to hassles of filling forms and submitting document, just contact your bank's call center or drop them an email. They will be able to close and open account without hassle, I guess.

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  21. I am a US citizen of Indian origin with OCI card who worked in India for a few years. Now, I am back in US. According to RBI , if the residency status changes from Resident to Non resident, existing resident account and deposits should be re-designated as NRO account. Presently, I am going through this and the process is changing from one call center representative to the next. Will you shed some light on what forms and supporting documents are needed for the a smooth process.

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  22. What is difference between different NRE accounts and NRO accounts offered by ICICI e.g. they offer four types of NRE accounts like NRE regular, NRE Premia, NRE pro etc. Similalry HDFC, Axis Bank and Kotak also offers multiple types of NRE and NRO accounts, what are differences between them? Which one is better an why? Another thing, lots of foreign banks like DBS, Deutsche bank, Standard Chartered, RBS, HSBC are also offering NRE, NRO and FCNR account, should one go for them instead of Indian banks?

    ReplyDelete
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  24. Hi
    I am working in Dubai which account l should transfer my salary in my India account nre or nro

    ReplyDelete