The difference between NRE and NRO accounts

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The difference between NRE and NRO accounts

There are two options an NRI interested in opening a bank account in India can choose from an NRE or an NRO account. Are you an NRI keen on getting a bank account opened in India? Then it would be advantageous to know how these two types of accounts differ and which one is right for you. The Government of India has permitted NRIs to open rupee accounts in India in order to repatriate funds from their home countries. The two most common accounts are the NRE and NRO accounts. Lets take a closer look at them. Whats an NRE account? A Non-Resident External (NRE) account is a bank account thats opened by depositing foreign currency at the time of opening a bank account. This currency can be tendered in the form of travelers checks or notes. Whats an NRO account? A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI. An NRI can also open this account by sending remittances from his home country or by transferring funds from his other NRO account. It offers the same facilities as an NRE account, except that any repatriation done through this account should be reported to RBI by filling up prescribed forms. How do NRE and NRO accounts differ? Funds remitted from overseas sources or local funds that would otherwise have been sent to the accountholder abroad can instead be transferred to NRE Accounts. On the other hand, local funds that arent eligible to be remitted abroad must be credited to an NRO account. Can you transfer funds fromanNREto anNROaccount and vice versa? Its easy to transfer funds fromanNREto an NRO account. But its not possible to transfer funds from an NRO account to an NRE account. Once you transfer funds fromanNREtoanNRO account, the amount is non-repatriable. Consequently, you cannot transfer it back. Whats the difference in the tax treatment for interest earned on an NRE and an NRO account? The interest earned on any type of NRO bank as well as the credit balances in this kind of account are taxed under the account holders tax bracket. On the other hand, interest earned on the NRE account is totally exempted from income tax, and the credit balances in the account dont attract any wealth tax. Any gift given to a close relative doesnt attract gift tax. NRE and NRO accounts are two different types of rupee accounts permitted by the Government of
India for NRIs. Have you tried opening either of these accounts? With which bank did you open your account? How did you decide which one to go for?

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4/5/2013 10:54 PM

The difference between NRE and NRO accounts

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4/5/2013 10:54 PM