NRI · 5 min read
NRE vs NRO Account:
Which One Do You Need?
Most NRIs need both. NRE holds money earned abroad and moves freely; NRO holds money earned in India and is taxed here.
Ravinder Pal Singh Ubeja ·
Use an NRE account for money you earn abroad and want to move in and out freely. Use an NRO account for income you earn in India, such as rent, dividends or pension. Most NRIs end up holding both.
The differences that matter
- Source of money. NRE: funds from abroad. NRO: funds earned in India, plus money from abroad if you choose.
- Repatriation. NRE balances, principal and interest, can be moved abroad freely. NRO repatriation is capped at USD 1 million per financial year, with a chartered accountant's certificate (Forms 15CA and 15CB).
- Tax on interest. NRE interest is exempt from Indian income tax while you remain an NRI. NRO interest is taxable, with tax deducted at source; treaty relief may apply.
- Joint holders. NRE accounts can be held with another NRI, or with a resident relative on a former-or-survivor basis. NRO accounts can be held jointly with residents.
- Transfers. Money can move from NRE to NRO freely; NRO to NRE only within the repatriation rules.
Which one for investing
Invest through NRE if you want the investment and its proceeds to be fully repatriable. Use NRO for investments funded by Indian income, or where you do not plan to take the money abroad. Mutual funds accept both; see NRI mutual fund KYC and tax.
A common mistake
Leaving an ordinary resident savings account running after you move abroad. Under FEMA rules it should be redesignated as an NRO account. Banks can do this with a simple form, and it keeps your investments and KYC consistent.