27 May 2025Managing finances across countries can be challenging for Non-Resident Indians (NRIs). To manage income and investments, an NRI must choose the right type of bank account in India—either an NRE (Non-Resident External) account or an NRO (Non-Resident Ordinary) account.
While both accounts cater to the banking needs of NRIs, they differ in terms of purpose, tax treatment, fund repatriation, and deposit sources. Understanding these differences is essential before making any financial or investment decisions in India.
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What is an NRE Account?
An NRE account is designed to help NRIs park their foreign income in India. It is maintained in Indian Rupees, and funds are deposited in foreign currency, which is then converted to INR at prevailing exchange rates.
The key benefit of an NRE account is that both the principal and the interest earned are completely tax-free in India. Additionally, the funds are fully and freely repatriable, making it ideal for NRIs who want to send money back to their country of residence without restrictions.
However, NRE accounts are exposed to exchange rate fluctuations, which means the account holder may face currency risks depending on market movements.
What is an NRO Account?
An NRO account, on the other hand, is used to manage income that is generated in India. This includes earnings from sources like rent, dividends, pension, or any other income that originates within the country.
Unlike NRE accounts, the interest earned on NRO accounts is subject to Indian taxation. A flat Tax Deducted at Source (TDS) of 30% (plus surcharge and cess, if applicable) is levied on the interest income.
While repatriation is allowed from NRO accounts, it is capped at USD 1 million per financial year, and only after paying the applicable taxes. This makes it suitable for NRIs who have consistent income in India and need to manage local expenses or investments.
Can an NRI Hold Both Accounts?
Yes, NRIs can open and maintain both NRE and NRO accounts simultaneously. Many choose this approach to effectively segregate their Indian and foreign income. For instance, rental income from Indian properties can go into the NRO account, while salary earned abroad can be deposited into the NRE account.
Maintaining both accounts can provide better flexibility in handling diverse income streams while optimizing tax efficiency and repatriation strategies.
Understanding the differences between NRE and NRO accounts is essential for any NRI planning to invest or manage finances in India. Your choice should align with your income source, repatriation needs, and tax obligations. Making the right decision can help you maximize returns and stay compliant with Indian financial regulations. At Regitom Associate, we offer specialized NRI services in India to guide you every step of the way. From opening and managing NRE/NRO accounts to ensuring smooth investment, taxation, and legal processes, our expert team supports your financial journey. Trust Regitom Associate’s NRI services in India to make your India investments simpler, safer, and more rewarding.