Q. What is NRE NRO Accounts ?
Literal meaning -
NRE: Non- Residential External
NRO: Non- Resident Ordinary
Both accounts are opened by NRI’s in India 🇮🇳 which are in INR denominations.
Q. What’s the difference between NRE & NRO?
Basic Difference:
NRE account opened by NRI to park their “Foreign Earnings”
NRO account opened by NRI to manage “Income earned in India.
Q. Who can open NRE NRO Account’s ?
NRE NRO A/c can be opened by
NRI (Non Resident Indian)
OCI ( Overseas Citizen of India) Card Holder
PIO ( Person of Indian Origin) Card Holder
The above persons are NOT ALLOWED to open /operate regular savings accounts in India.
Important: -
If your are NRI, OCI or PIO and operating Regular savings account in India, its an serious offence under FEMA laws of RBI.
Kindly convert your regular accounts to NRE or NRO if you haven’t done so to avoid heavy penalties.
Q. Types of NRE NRO Accounts ?
NRE NRO accounts can be Savings A/c, Current A/c, FDR A/c, Recurring Deposit A/c etc.
So it can be opened in any of the above types.
Q. Can NRE NRO accounts be Jointly opened ?
Yes.
NRE account can be opened with another NRI and close relative Resident Indian.
NRO account can be opened with any Indian Citizen or another NRI.
But primary mode of operation will be with NRI only.
Q. Taxability of NRE Accounts:
Interest received from Savings, FD, RD from NRE account will be EXEMPT from Income Tax in India.
This is the main reason many NRI’s go for NRE accounts.
Q. Is all income earned in NRE accounts are TAX FREE?
No. Only interest income in NRE is EXEMPT from Tax.
Other incomes receiving in NRE accounts are Taxable. Like, Dividends, Capital Gains on Stocks, Mutual Funds etc.
Q. Taxability of NRO Accounts
There will NOT be any Exemption on Interest received on NRO accounts.
The interest earned on these accounts are subject to flat TDS at 30% + Education Cess etc.
Whether any tax payable in India or not on it will be decided while ITR filling.
Now, you must be wondering
Which account to choose OR Why 2 different types of accounts ?
Answer depends on ability of REPATRIATION of funds from these two accounts to outside India.
Q. Repatriation of funds from NRE NRO outside India
Funds from NRE accounts are FREELY repatriable.
Means, one can transfer any amount (WITHOUT ANY LIMIT) outside India from his/her NRE Accounts.
Funds from NRO accounts are repatriable outside India with some CONDITIONS.
1. Need to prove that Taxes Paid on money in NRO account. This can be proved by CA Certificate.
2. One can transfer only upto $1 Million/Year/NRI for whatever may be the reason even though tax paid.
Q. Depositing Rules
Foreign Income or Income in Foreign currency can be deposited in NRE or NRO accounts.
Additionally, Income from investments directly made though NRE accounts will be credited in NRE accounts.
But, income originated from India can be deposited in NRO Accounts only.
You can’t deposit the same directly in NRE accounts.
Indian income like Rent Income, Interest, Dividend, Capital Gains from Investments through NRO accounts.
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