If you’re an NRI (Non-Resident Indian), choosing the right type of bank account in India can be crucial for managing your finances efficiently. Two of the most common options are the NRE (Non-Resident External) and NRO (Non-Resident Ordinary) accounts. While they may seem similar at a glance, they serve different purposes, come with different rules, and offer distinct tax implications.
In this article, we’ll explore the key differences between NRE and NRO accounts—right from purpose and taxability to fund repatriation, joint ownership, and more—to help you make the most informed decision.
What Are NRE and NRO Accounts?
NRE (Non-Resident External) Account:
An NRE account is a rupee-denominated account that allows NRI/OCIs to park foreign earnings in India. Funds must be converted to INR before deposit.
NRO (Non-Resident Ordinary) Account:
An NRO account is also a rupee-denominated account, but it is designed for managing income earned in India, such as rent, dividends, pensions, or any local earnings.
Key Differences Between NRE and NRO Accounts
Here’s a detailed side-by-side comparison:
| Feature | NRE Account | NRO Account |
|---|---|---|
| Purpose | To deposit foreign income in India | To manage Indian income (e.g. rent, dividends, salary) |
| Currency of Deposit | Indian Rupee, but directly sent from a foreign country or from another NRE account. | Only INR from either a foreign country or local income from India |
| Account Type | Savings, current, recurring, or fixed deposit | Savings, current, recurring, or fixed deposit |
| Repatriation (transfer abroad) | Fully and freely repatriable | Principal repatriation up to $1 million/year with documentation; interest is repatriable |
| Taxability | Tax-free (principal + interest) | Interest is subject to TDS (up to 30% + surcharge/cess) |
| Joint Account Eligibility | Can be held jointly with another NRI/OCI only | Can be held jointly with NRI or resident Indian |
| Account Opening Requirement | Requires foreign source of income and NRI/OCI status | NRI status required, but income may be from Indian sources |
| Currency Conversion | Foreign currency converted to INR | Foreign or Indian currency converted to INR as needed |
Let’s Break Down the Finest Details
1. Tax Treatment: A Critical Factor
- NRE accounts enjoy complete tax exemption in India – both on the principal and on the interest earned.
- NRO accounts are taxable under Indian Income Tax laws. Interest earned is subject to TDS at 30%, which can be reduced via Double Taxation Avoidance Agreements (DTAA) if applicable.
🔍 Tip: If you’re looking to save on taxes, the NRE account is generally more favorable.
2. Repatriation: Can You Move Funds Freely?
- With NRE, both principal and interest are fully repatriable without any restriction.
- With NRO, only interest is freely repatriable. Principal can be repatriated up to USD 1 million per financial year, but you must submit Form 15CA and 15CB (certified by a Chartered Accountant).
3. Income Sources: Where’s the Money Coming From?
- Use NRE to park income earned abroad (e.g., salary, investments) in INR.
- Use NRO to manage income from Indian assets (e.g., rental income, dividends, pensions, Indian business income).
4. Money transfer: Can I transfer money from my NRE account to an NRO or resident account?
Yes, you can transfer money from your NRE account to your NRO or resident account. However, once the money is moved to an NRO or resident account, it loses its tax-free status and becomes subject to Indian taxation rules. Transfers from NRE to NRO or resident accounts are allowed without restrictions, but transferring from NRO to NRE requires documentation and is subject to limits set by the RBI. Transfers between NRO and resident accounts are allowed without any restrictions.
5. Currency Risk: A Subtle Difference
- NRE accounts are exposed to currency risk. If the INR weakens, the value of your savings may fall when converted back to foreign currency.
- NRO accounts, already in INR, do not carry currency risk—but this means they are more useful for Indian spending or investment, not for moving money abroad.
6. Joint Ownership Rules
- NRE account can be jointly held only with another NRI or OCI (Overseas Citizen of India).
- NRO account can be jointly held with an Indian resident, which is useful for managing shared assets or family obligations in India.
✅ Example: If your parents in India need to operate the account, an NRO account is the practical choice.
When Should You Choose NRE vs. NRO?
| Scenario | Best Choice |
|---|---|
| You want to save foreign income in India and repatriate freely | NRE |
| You want to receive rent from a property in India | NRO |
| You want to avoid taxes on interest earned in India | NRE |
| You need to share account access with a family member in India | NRO |
| You want to invest foreign income in Indian FDs or mutual funds | NRE |
Can You Convert Between NRE and NRO?
Yes, but not directly. If you need to convert:
- NRE to NRO: Submit a written request to your bank. This is usually allowed if your status changes (e.g., returning to India).
- NRO to NRE: Not allowed directly due to tax and repatriation limits. You’ll need to repatriate funds from NRO, then re-deposit in NRE.
Can You get a debit card for NRE and NRO accounts?
Yes, banks often offer premium cards to NRE and NRO account holders. These cards typically come with exclusive benefits such as free access to domestic and international airport lounges, higher transaction limits, increased reward points, complimentary purchase protection and accident insurance, and no annual fees for premium account holders.
Documentation Required
To open either account, you’ll typically need:
- Valid passport and visa
- Proof of NRI status
- Overseas and Indian address proofs
- PAN card or Form 60
- Recent passport-size photos
How to send money to NRE and NRO accounts?
Several FinTech companies can do instant transfers to NRE and NRO accounts.
| Company | NRE/NRO | Go to Money Transfer company |
 | Both NRE and NRO | Go to Wise RemitReview Score: 9.1 WISE Review |
 | Both NRE and NRO | Go to Xe RemitReview Score: 9.4 XE Review |
 | Both NRE and NRO | Go to CurrencyFair RemitReview Score: 9.0 Currencyfair Review |
 | Both NRE and NRO | Go to transferGo RemitReview Score: 8.5 TransferGo Review |
 | Both NRE and NRO | Go to Remitly RemitReview Score: 9.2 REMITLY Review |
 | Both NRE and NRO | Go to WorldRemit RemitReview Score: 8.3 Worldremit Review |
 | Both NRE and NRO | Go to ACE money transfer RemitReview Score: 8.8 ACE Review |
 | Both NRE and NRO | Go to profee RemitReview Score: 8.7 Profee Review |
 | Both NRE and NRO | Go to PaySend RemitReview Score: 8.5 Paysend Review |
 | Both NRE and NRO | Go to Western Union RemitReview Score: 8.4 Western union Review |
 | Both NRE and NRO | Go to MoneyGram RemitReview Score: 8.9 Moneygram Review |
 | NO NRE, NRO only | Go to Abound RemitReview Score: 7.9 ABOUND Review |
 | NO NRE, NRO only | Go to LemFi RemitReview Score: 9.0 Lemfi Review |
 | NO NRE, NRO only | Go to Remit2Any RemitReview Score: 7.9 Remit2any Review |
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Can I open an NRE or NRO account from outside India?
Yes, many private banks in India allow you to open NRE or NRO accounts while residing abroad. Banks such as Axis Bank, ICICI Bank, HDFC Bank, YES Bank, RBL Bank, and AU Small Finance Bank provide this service. They will send you a PDF account opening form, which you can print, fill out, and sign. If you are not in India, you will have to get your passport copy notarized/attested by recognized banks or indian embassy. Once completed, the bank will arrange free pickup of the form along with your supporting documents through their courier partners. After receiving your documents, the bank will open your NRE/NRO account and assist you in setting up internet and mobile banking. Your debit card will also be shipped to your overseas address.
Can Students Studying Abroad Open an NRE Account?
Yes, students who move abroad for higher education can open an NRE account. Once you qualify as an NRI—typically after staying abroad for more than 182 days—you’re eligible to open this account. It allows you to park your foreign earnings or remittances from India in Indian Rupees. Many banks now offer simple online processes for students to open NRE accounts soon after reaching their study destination.
Can OCI Holders Open an NRE Account?
Yes, OCI (Overseas Citizen of India) holders can open an NRE account in India. Since OCI cardholders are treated as NRIs for banking purposes, they are fully eligible to open and operate NRE accounts. These accounts allow OCI holders to deposit foreign income in Indian Rupees, earn tax-free interest, and enjoy full repatriation of funds.
Withdrawing money from NRE account
You can freely withdraw money from your NRE/NRO account in Indian Rupees. The funds in this account are fully repatriable, meaning you can transfer them back to your overseas account without restrictions. Withdrawals can be made via ATM, online banking, or by visiting the bank branch. You can use your debit card at any point of sale (POS) merchant location, as any other normal ATM/debit cards while enjoying higher transaction limits.
Final Thoughts
Choosing between an NRE and NRO account depends on your income sources, financial goals, and repatriation needs. Here’s a quick rule of thumb:
- Use NRE to bring foreign income into India, save on taxes, and maintain liquidity.
- Use NRO to manage Indian income, comply with tax regulations, and support dependents or pay Indian expenses.
Understanding the nuanced differences between the two ensures better financial planning and regulatory compliance. For many NRIs, maintaining both accounts may offer the best of both worlds.
