An Introduction – NRE Account & NRO Account
Before we can grasp the advantages of these accounts, we must first understand what NRE and NRO accounts are and how important they are. NRIs must have an NRE/NRO account in India for their transactions, according to the Indian government. It is prohibited for NRIs to have a savings account in India, according to the legislation. Now, in the midst of all of this, we have a better understanding of what NRIs go through.
If NRIs earn money both in India and overseas, this can be a significant problem. The NRE and NRO Accounts can help with managing finances, managing bank accounts in other countries, and sending and receiving money from their home accounts.
Understanding The Difference Between An NRE And An NRO Account
Before we proceed, it’s critical to comprehend the significance of these two accounts.:
Non-Resident External (NRE) Account:
A NRE Account is used to keep track of money generated outside of India. It is an account dominated by the Indian Rupee, which implies that any funds deposited in this account are converted to INR. It can be opened as a savings account, a current account, a recurring account, or a fixed deposit. The principle and interest earned on this account are fully and freely repatriable, meaning you can move funds from your NRE Account to your foreign accounts without any limits or taxes.
Non-Resident Ordinary (NRO) Account:
An NRO Account is used to keep track of revenue generated in India, which can be in the form of rent from a property owned in India or monthly income like salary or pension. Although it is primarily a rupee account, you can receive funds in both Indian and international currency. It can be opened as a savings account, a current account, a recurring account, or a fixed deposit. TDS (Tax Deducted at Source) of 30% is deducted from the interest earned on the NRO account, together with a surcharge and an education cess. But you don’t have to be concerned about it. You have the option of receiving a tax refund based on your income tax bracket.
Advantages Of NRO Account
- You can use this account to deposit whatever savings you have before moving to another nation. You can also deposit profits from other sources in India, such as rents, dividends, and so on, as well as transfer from your NRE account or from outside to this account. As a result, this account is best suited for Indians who earned money and owned assets in India before relocating to another nation.
- On a former or survivor basis, you can also register a joint NRO account with a resident Indian. You can also mandate a resident Indian (provide the power of attorney to a person residing in India) to assist you with all banking and account-related operations for your NRO Account with banks like Standard Chartered.
- NRO account balances can only be repatriated by NRIs and PIOs up to USD 1 million.
Advantages Of NRE Account
An NRE account is used to transfer income earned in other nations to India. The following are some of the advantages of having an NRE account:
- Your NRE Savings account funds are entirely reimbursable. You have complete freedom to move funds (including capital and interest) out of India at any time.
- Interest earned in your NRE account will not be taxed in India, allowing you more financial control. However, depending on the tax rules in your place of residence, you may or may not be taxed for this investment.
- An NRE account is kept in Indian Rupees, just like an NRO account. This account is mostly for crediting funds transferred from an international account.
- You can mandate a resident Indian for your NRE account with banks like Standard Chartered, just like you can with NRO accounts. However, you can only open a joint NRE account with an NRI or a family who lives in India.
In A Nutshell – NRE Account & NRO Account
So, NRIs, as soon as you receive your Non-Resident Status, be sure to convert your existing resident accounts to NRE/NRO Accounts or open a new NRE/NRO Account to take advantage of the many benefits and conveniences that NRI Banking offers.
