Comparative chart of NRE and NRO account
|Particulars||NRE account||NRO account|
|Non Resident External Account||Non Resident Ordinary Account|
|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. NRO accounts allow NRIs to manage income earned in India, in the form of rent, dividend, pension, interest etc.|
|Source of fund||Income originating outside India can be deposited into these accounts. However, income originating within India can’t be deposited.||
Income originating outside India can be deposited as well as income originating within India can also be deposited into the NRO account.
|Taxability||Interest earned is tax free because exempt u/s 10(4)(ii) of the Income Tax Act.||Interest earned is taxable, Interest earned is taxable.|
|Repatriability of fund from India to outside India.||Can be repatriated||Only interest amount can repatriate , the principle amount can be repatriated within the set limits only which is up to USD 1 million in a financial year.
Funds from your NRO account can be transferred to either your bank account overseas in foreign currency or to your NRE account in Indian rupees.
|Inter transfer of funds||NRE Account holder, can transfer money not only to another NRE account but to NRO account as well.||
NRO account holder, may only transfer money to another NRO account but cannot transfer money to an NRE account from an NRO account.
|Deposits and Withdrawals||Can deposit in foreign currency, and withdraw in Indian currency.||Can deposit in foreign as well as Indian currency, and withdraw in Indian currency|
|Operation as Joint Account||Can be opened by two NRIs but not with resident.||Can be opened by an NRI along with an Indian citizen or another NRI|
Exchange Rate Risk
|Prone to risk||Not prone to risk|
|On returning India permanently||upon return to India permanently, you will have to convert your existing NRE savings account and deposits into resident savings account and deposits.||upon return to India permanently, you will have to convert your existing NRO savings account and deposits into resident savings account and deposits.|
|Continuation of account after returning to India permanently||You cannot maintain your NRE account and NRE FDs when you are an RNOR. You need to convert your NRE account to resident account immediately upon returning to India within reasonable time.||You cannot maintain your NRO account and NRE FDs when you are an RNOR. You need to convert your NRE account to resident account immediately upon returning to India within reasonable time.|
|Consequence||Even after becoming a resident if you continue your NRE account and FDs, then the interest from them will be taxable. Interest from NRE account and FDs are tax-free only for non-residents.||
Interest income always taxable