Non-Resident Ordinary Rupee Account (NRO) or Non-Resident External Rupee Account (NRE)


Non-Resident Ordinary Rupee Account (NRO) or Non-Resident External Rupee Account (NRE)

A Non-Resident External (NRE) account is a bank account that requires depositing foreign currency at the time of opening a bank account. This currency can be tendered in the form of traveler’s cheque or notes. It permits an NRI to hold and maintain foreign currency earnings. The account can be opened in the name of two or more Non-Resident Indians (it cannot be held jointly with resident), for depositing the earnings earned in a foreign currency.

The amount held in the NRE account is freely repatriable whether it is the amount of principal or the amount of Interest. One can send money as remittance from abroad or transfer from another NRE account. Interest received on NRE account is exempt under section 10(4) of the Income Tax Act, 1961.

A Non-Resident Ordinary Account (NRO) is just as a normal bank account opened by Overseas Citizen of India (OCI) or a Person of Indian Origin (PIO) or even a NRI. The account can be held jointly with Residents. The purpose of opening this account may be sending remittances from home country or by transferring funds from other NRO account. NRO Accounts helps NRIs manage income earned in India i.e. Income taxable at India such as rent, dividends, or pension.

Accrued interest income and balances held in NRO accounts are taxable as per Income tax Act, 1961. Tax is to be deducted at source in NRO accounts, unlike NRE accounts on the amount of income, say Interest. Money at NRO account is not repatriable except for the following:

  • current income
  • upto USD 1 (one) million per financial year (April-March), for any bonafide purpose, out of the balances in the account

Interest rates offered by banks on NRO deposits cannot be higher than those offered by them on comparable domestic rupee deposits.

NRO accounts are not prone to exchange rate differences. Funds from NRO to NRE accounts can be transferred and vice-versa. To transfer money from NRE to NRO account, you would need a Chartered Accountants certificate.

Make a note of differences on NRE and NRO accounts.

Basis NRE Account NRO Account
Full Form Non Resident External (NRE) Account Non Resident Ordinary (NRO) Account
Definition It is an account of an NRI to transfer foreign earnings to India. It is an account of an NRI to manage the income earned in India
Tax implication Interest earned is tax free u/s 10(4). Interest earned is taxable and TDS is deductible u/s 195.
Repatriation Permission Can repatriate Can repatriate the interest amount, the principle amount can be repatriated within the set limits
Joint Holders Can be opened by two or more NRIs Can be opened by an NRI along with an Indian Resident  or another NRI
Withdrawals & Deposits Can deposit in foreign currency, and withdraw in Indian currency Can deposit in foreign as well as Indian currency, and withdraw in Indian currency
Risk of Exchange Rate Fluctuation Prone to risk Not prone to risk



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