NRO vs NRE Account

Updated on Jan 9 2012

A few days ago I wrote about how you could open a NRE / NRO account while still abroad, and some people had a question on which is the better among the two.

Like most other things – it depends on what your specific needs are but now the big difference in NRO and NRE accounts is that the fixed deposits that you open in your NRE account are tax free in India. Here is a list of some of the best NRE fixed deposits with Indian banks.

Here is a post with differences between the two accounts, and you can go through these main points to see which one suits you most.

Difference between NRO NRE  Accounts

1. Interest on NRE account is tax free where NRO is taxable in India: It used to be that NRE accounts paid a lower interest than NRO accounts, but recently RBI allowed banks to set up their own NRE rates, and as a result now NRE fixed deposits pay as much as a NRO fixed deposit.

The big difference is that there is no tax in India on the interest on this NRE account, so it makes much more sense to open a fixed deposit using a NRE account instead of a NRO account.

2. NRE accounts are tax free whereas NRO accounts are not: You don’t have to pay any taxes on your NRE account, but interest income on the NRO deposit is taxed in India. There was a comment the other day from a reader stating that NRO tax rates have gone down, but I can’t find confirmation of that anywhere, so if you have any information on that then please leave a comment.

3. Up to a Million Dollars is Repatriable in NRO Account: Repatriable in this context means money transferred from India to another country, and it used to be that money from a NRO account wasn’t repatriable at all.

However, RBI has made some changes and now up to a million dollars can be repatriated from a NRO account in a year. However, a friend who was trying to do this told me that it’s a bit of a hassle transferring money from NRO account when compared with a NRE account.

If you foresee the need to repatriate more than a million dollars then you should opt for a NRE account.

Conclusion on NRO NRE Comparison

A lot of NRIs need a bank account back in India because they plan to return some day in the future or they have to maintain their family still in India. So you need something back in India – either a NRO or a NRE account.

I’ve seen the rules change in such a way for these accounts that for a long time it made sense to have a NRO account but not a NRE account, and now the situation has been reversed.

When you open an account – the bank gives you an option to choose if you want to open one or both, and you should choose both at the time so that you don’t have to go through the lengthy process of submitting documents and opening a new account in case the rules change again.

Update: Deleted the tax saving line as pointed out by Satie below.

131 thoughts on “NRO vs NRE Account”

  1. Hi … I am a PIO residing in US. I opened an NRE account for the purpose of investing, as the interest rates are better. Can you please tell me:
    1) How to send money to India into the NRE account as they do not provide a routing number, just a Swift Code. And that is of JP Morgan Chase. All American banks need a routing number. Wire transfer can be done, but has a high cost.
    2) How can I get the money back in US dollars … I mean, what will be the mode of transfer if I cannot set up the routing number.
    -thanks so much

  2. I have started to invest in Mutual funds (Some in lump sum, some are SIP). Can I continue them with the same bank account(indian account) by converting my indian bank account to NRO? I have just moved out of India for work.

  3. I need to open NRE account.
    As discussed with Kotak Bank employee,i will get one new NRE account and my existing corporate salary account will be converted to NRO.

    In NRO account, i need to maintain 10000 INR AMB and the tax on interest will be 30%.I can do all the indian transactions
    using my NRO account.

    In NRE account, there is no tax on interest and balance.I can withdraw or transfer the full/partial amount anytime without any charges.
    I can open fixed deposits and there will be no tax on the interest earned by these FD’s.

    I can convert this NRO account to resident saving/corporate salary account once i will be back to India and there will be
    no charges for the conversions of accounts.

    I can transfer the full money from NRE to resident saving without any charges.

    Queries :

    a) Can i use my NRE balance to do online transactions in india?
    b) My saving account will be converted to NRO. What about the current account ?
    c) What is the fees for NRE/NRO netbanking and ATM annual charges ?
    d) What are the the hidden charges for the whole process, please mention in detail?
    e) Will i get a check book for NRE/NRO account? If yes, what are the charges ?
    f) After full amount transfer to resident saving account, can i close my NRE account ?
    g) Will there be any wealth tax on NRE savings/interest?
    h) Will the tax on interest for NRO account is refundable (as in india non-taxable income is Rs 250000) after filing tax return ?
    If yes,pls mention procedure ? What about 15H or 15G ?
    i) Can i continue my NRE account for long time after coming to india ?
    j) Is it mandatory to get Corporate salary account (resident account) convereted to NRO ?
    k) Do i need to maintain balance in NRE account ?
    l) What is the daily free transfer and withdrwal limit from NRE account ? What method can i use NEFT or other ?
    m) Can i know the withdrawl fees from NRE ATM in india and overseas ?
    n) Is there any transfer limit to NRE account ?

    Also share the closure details of NRE account ?

  4. Now I am working in kuwait and i am need to open NRI account in madurai Tamilnadu ,india. Tell me the procedure

  5. I am in Kuwait now. I have opened a new NRE account in particular bank. But already i have an account in the same bank.and I don’t know whether its working or not, I am not using that old account and I don’t know what happened to that old one– they said they will link with my old one .is it possible what they said and is it safe doing that? ? Kindly give me an information on this… thank you so much

  6. Hi
    I have PR in New Zealand. I wanted to know that if I open NRO account in India ,can I transfer fund from NZ$ to INR -INR to NZ$ ?
    2)I have joint saving account with my wife in BOB in India. We both have PR of NZ. We are residing in NZ. My wife is earning some interest from investments in India . The interest is directly deposit in our joint saving account.Can we transfer/deposit cash this in form of INR to my NRO account?
    Thanks & Regards

  7. I hold large number of shares in my Indian Demat account, I am now a Canadian citizen, I dont want to sell the shares instead transfer them over to a PIS account

  8. I would like to buy a property in india and would like to pay the property value by cheque i have both NRE and NRO account. What difference will it make for me if i pay the property price by cheque ,when i pay through NRE and NRO account. Which one will be beneficial for me, such as to avoid any kind of tax or any other charges. Also let me know if there is any advantage and disadvantage in long term.

  9. I have both NRE and NRO account in India .I want to deposit FD name with my daughters. what is beneficial which Iget

  10. hi manshu,

    I have earned interest from my nro account and bank deducted tds from that interest amount. can i get back refund by filing ITR ,though i have not income more than basic exemption limit in india. i have only interest income which is from nro account and which is less than basic exemption limit.

  11. Hi There,

    Can you please throw some light on my below questions:-

    Suppose I transferred $1000 to NRE account say today, first time it will be converted to INR as per exchange rate & it will be credited to my NRE account. After 6 months, suppose i need money in INR, will that time currency conversion rate will come into picture again?

    2. Can we withdraw money in India from NRE account? If yes, what will the how will the currency conversion handled?
    3. Can we transfer money from NRE account to (say) a friend in India? or to my other self account? Please confirm.


  12. I have Saving Account in India and I wanted to covert it into NRO Account. My queries are,
    1) I have RD running in my account from last 3 years and it is going to finish in next year. After maturity, do I need to pay tax as per NRO tax regulation?
    2) I have few MF SIPs connected to my account. Will they be connected after converting to NRO account.


  13. I have NRO & NRI desposits in India and would like to purchase US$ in India. Is it possible. Please advise.


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