NRE is a Non Resident Rupee account. NRO is a Non Resident Ordinary Rupee account. Both NRE and NRO can be savings or currents accounts. The two are usually the most preferred options for nonresident Indians. Both the accounts allow people to save their money or just park it, which is available in Indian Rupee, and can be easily moved to and from other Indian or overseas accounts. Despite the two being seemingly similar, there are some fundamental and applicative differences between the two. Difference between NRE and NRO Account
Opening the Account
An NRE account can only be opened and operated by a nonresident Indian. An NRO account can be opened by a nonresident Indian or a resident Indian; that is anyone of Indian origin or citizenship. An NRE account can be opened jointly by two nonresident Indians but not by a nonresident Indian and a resident Indian. An NRO account can be opened jointly by one nonresident Indian and a resident Indian or two nonresident Indians.
Balance Requirements
While both the accounts require the monthly balance to be an average of INR 75,000, the remittances and withdrawals vary. An NRE account permits unlimited remittances and withdrawal. An NRO account limits the remittances to 1 million USD and it will only allow withdrawals subject to Indian taxes.
Taxes
An NRE account doesn’t impose any taxes on the money being deposited. The source of funds can be employment, business, interest or anything that a nonresident Indian secures overseas and remits into the NRE account. Since these funds are already taxed in the country of source, they are not taxed again in the NRE account or by the Indian government. Whether it is income tax, gift tax or wealth tax, none of these are applicable.
In an NRO account, all funds are taxable. This is one reason why NRO accounts are imperative. But any fund that is sourced or generated in India cannot be deposited in an NRO account. Those funds, which could be sale of a property or rental income, any interest on deposits in India or just some dividends from some stocks, will have to be deposited in the NRO account. Such funds or income will be taxed.
If you are a nonresident Indian and have the sole interest of parking your money saved from incomes on foreign shores in an Indian account then NRE account is the ideal choice. If you are a nonresident Indian and wish to save or operate money that is sourced from incomes generated within India then you should opt for an NRO account.
