This article will help NRIs clearly understand the differences between NRE and NRO accounts, enabling them to make informed financial decisions regarding taxation, repatriation, and managing their income from India and abroad.
Table of Contents
- Introduction – Why NRE vs. NRO matters for NRIs
- What is an NRE Account? – Purpose, features & example
- What is an NRO Account? – Purpose, features & example
- NRE vs. NRO Comparison – Side-by-side table & key differences
- Tax Implications – Tax rules for NRE and NRO accounts
- Repatriation Rules – Limits, forms & compliance
- Documents Required – KYC requirements for both accounts
- When to Use Each Account – Situational guide for NRIs
- FAQs – 14+ common questions answered
- Bonus: FCNR Accounts – Overview & benefits
- Conclusion – Choosing the right account strategy
For Non-Resident Indians (NRIs), managing income from both India and abroad often requires navigating the Indian banking system’s special provisions. Two of the most common types of accounts offered by Indian banks to NRIs are the Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts. While they may sound similar, the differences are critical—and can impact taxation, repatriation, and your overall financial strategy.
This comprehensive 2025 guide breaks down the differences between NRE and NRO accounts with examples, tables, and use cases so you can make confident financial decisions.
What is an NRE Account?
An NRE account is used to deposit your foreign income in India, allowing you to maintain your funds in Indian Rupees while enjoying full repatriation benefits and tax-free interest.
Key Features of NRE Account:
| Feature | Details |
|---|---|
| Purpose | To park foreign income in India |
| Currency | Indian Rupees (INR) |
| Deposits | Only foreign currency (converted to INR) |
| Repatriation | Fully repatriable (principal + interest) |
| Interest Taxation | Tax-free in India |
| Joint Holding | Only with another NRI/PIO |
| Risk | Exposed to currency fluctuation (if INR depreciates) |
Example:
If you earn a salary in the USA and want to send money home, your NRE account allows you to remit USD, which is converted to INR. The interest earned on that account is exempt from Indian tax.
What is an NRO Account?
An NRO account is used to manage income earned in India—such as rent from property, pension, dividends, or interest from Indian investments. This account is also held in INR, but comes with limited repatriation and taxable interest.
Key Features of NRO Account:
| Feature | Details |
|---|---|
| Purpose | To manage income generated in India |
| Currency | Indian Rupees (INR) |
| Deposits | Indian and foreign currency allowed |
| Repatriation | Limited to USD 1 million per financial year |
| Interest Taxation | Fully taxable in India |
| Joint Holding | With NRI or resident Indian |
| Tax Deducted at Source (TDS) | 30% on interest (can be reduced via DTAA) |
Example:
If you earn rent from an apartment in Mumbai or receive a pension, your NRO account is the appropriate channel for receiving and managing these funds.
NRE vs NRO: Side-by-Side Comparison
| Feature | NRE Account | NRO Account |
|---|---|---|
| Who can open | NRIs and PIOs | NRIs and PIOs |
| Source of funds | Foreign income | Indian income or foreign income |
| Currency held | INR | INR |
| Taxation | Interest is tax-free | Interest is taxable at 30% TDS |
| Repatriation | Fully repatriable | Limited to $1 million/year with tax compliance |
| Joint account | Only with another NRI | Can be with resident Indian |
| Exchange rate risk | Yes | Yes |
| Best for | Sending foreign earnings to India | Managing income earned in India |
Tax Implications: The Crucial Difference
NRE Account Taxation:
- Interest is completely tax-exempt under Section 10(4) of the Income Tax Act.
- No TDS is deducted.
- Ideal for tax-free growth of your foreign savings.
NRO Account Taxation:
- Interest income is taxable at 30% + applicable surcharge.
- TDS is deducted by the bank.
- Double Taxation Avoidance Agreement (DTAA) can reduce TDS (e.g., to 15% for USA).
Tip:
To reduce your TDS burden, submit:
- Tax Residency Certificate (TRC)
- Form 10F
- Self-declaration under DTAA
Repatriation Rules: Moving Your Money Abroad
| Account | Repatriation Limit | What You Need |
|---|---|---|
| NRE | No limit | Simple bank request (Form A2 + ID proof) |
| NRO | USD 1 million per financial year | Form 15CA, 15CB (CA certification), tax clearance |
If you’re planning to repatriate funds, consult your bank or a Chartered Accountant (CA) to ensure all tax compliance is in place, especially for NRO funds.
Required Documents for Opening NRE/NRO Accounts
| Document | NRE | NRO |
|---|---|---|
| Passport (with valid visa) | Yes | Yes |
| Overseas address proof | Yes | Yes |
| PAN Card | Yes | Yes |
| Indian address proof | No | Yes (for KYC) |
| Recent photographs | Yes | Yes |
Accounts can typically be opened online or from abroad with banks like SBI, HDFC, ICICI, Axis, etc.
When Should You Use Which Account?
| Situation | Best Account |
|---|---|
| You earn salary abroad and want to save in INR | NRE |
| You own property in India and collect rent | NRO |
| You plan to repatriate foreign income back home | NRE |
| You receive pension, dividends, or Indian FD interest | NRO |
| You want tax-free interest income | NRE |
| You want to remit proceeds from property sale | NRO (with CA help) |
Before you decide which account suits you, it’s worth knowing exactly how NRE and NRO accounts work, their benefits, and who should open which.
Read our complete guide: NRE Account Complete Guide for NRIs 2025 and NRO Account Complete Guide for NRIs 2025
Frequently Asked Questions (FAQs)
1. Can I open both NRE and NRO accounts at the same time?
Yes, NRIs can hold both NRE and NRO accounts simultaneously. Each serves a different purpose—NRE for foreign income, and NRO for income generated in India.
2. Which account should I use to receive my salary earned abroad?
You should use your NRE account to deposit your foreign earnings. It allows full repatriation and interest earned is tax-free in India.
3. Can I transfer money from my NRO account to my NRE account?
Yes, but it’s not automatic. You’ll need to provide:
- A Chartered Accountant’s certificate (Form 15CB)
- File Form 15CA online with the Income Tax Department
It’s also subject to the USD 1 million repatriation limit per financial year.
4. Is the money in my NRE account safe from Indian taxes?
Yes. Both the principal and the interest in your NRE account are exempt from Indian income tax. However, ensure that the funds originate from overseas.
5. Is interest from NRO accounts taxable?
Yes. Interest earned on NRO accounts is taxable in India and is subject to TDS (Tax Deducted at Source), usually at 30% unless a lower rate is available via DTAA.
6. What documents do I need to repatriate money from an NRO account?
You typically need:
- Form 15CA (online form from the IT Department)
- Form 15CB (CA certificate validating tax compliance)
- Proof of source of funds (e.g., sale deed, rent agreement, investment maturity statement)
- PAN card
These are submitted to your bank before the transfer.
7. Can I deposit rental income in an NRE account?
No. Income earned in India—such as rent, dividends, pension—must be deposited in your NRO account.
8. Do I need to convert foreign currency before depositing in NRE?
No, banks automatically convert your foreign currency remittance into INR before crediting it to your NRE account. However, FCNR accounts allow you to maintain the funds in foreign currency.
9. Can I open a joint NRE or NRO account with a resident Indian?
- NRO account: Yes, you can open it jointly with a resident Indian on a “former or survivor” basis.
- NRE account: Only joint account holders who are also NRIs are allowed.
10. What is the USD 1 million limit on NRO repatriation?
This is the maximum amount you can repatriate from your NRO account in a financial year. It applies across all banks and accounts combined. Unused limits do not carry forward.
11. Do I need a PAN card to repatriate money from India?
Yes. A PAN card is mandatory for most repatriation transactions, especially from an NRO account. It’s required for filing forms and proving tax compliance.
12. What happens to my NRE/NRO account if I return to India permanently?
You must inform the bank and convert your NRE/NRO accounts into resident accounts or Resident Foreign Currency (RFC) accounts, depending on your future residency status.
13. Is there a deadline to repatriate after selling property in India?
There’s no fixed deadline, but it’s best to repatriate within the same financial year to simplify tax reporting. Remember, you must pay capital gains tax before repatriating the sale proceeds.
14. Can I avoid TDS on NRO interest under a tax treaty?
Yes, under the Double Taxation Avoidance Agreement (DTAA). To avail the lower rate, you must submit:
- Tax Residency Certificate (TRC) from your country
- Form 10F
- A self-declaration
Submit these annually to your bank.
Bonus: What About FCNR Accounts?
While NRE and NRO accounts are the most common for NRIs, there’s a third option worth knowing—FCNR (Foreign Currency Non-Resident) accounts.
| Feature | FCNR Account |
|---|---|
| Purpose | Fixed deposits in foreign currency |
| Currency | USD, GBP, EUR, JPY, etc. (not INR) |
| Tax | Interest is tax-free in India |
| Repatriation | Fully repatriable |
| Risk | No currency conversion risk |
| Ideal for | NRIs who want to avoid INR depreciation risk and earn returns in stable foreign currencies |
Note: FCNR is a type of fixed deposit—not a savings account. It’s best for NRIs who want secure, currency-stable returns for 1 to 5 years.
Final Thoughts
The choice between an NRE and NRO account is not just about banking—it’s about building a financial system that works across borders. While the NRE account is ideal for growing foreign income in India tax-free, the NRO account is indispensable for managing domestic income with full legal compliance.
A smart NRI uses both accounts as part of a broader financial plan. Ensure you stay informed, file taxes correctly, and consult a CA when needed. With the right strategy, your Indian and global earnings can work together to grow your wealth efficiently.
Disclaimer: This article is for informational purposes only. Regulations can change, and individual situations may vary. Always verify details before making decisions.
