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,

    My husband is an NRI residing in USA for the past one year. He has not opened any NRO or NRE account. He transfers money to India from his US account to his Indian account. Is t in anyway illegal or wrong? Please suggest.

    1. HI RASHMI,

      no problem but you have to explain the purpose of each remittance to the bank and rbi.
      the amount in saving account is taxable.
      so better open one NRE account and save your all income from USA. It is completely free from tax in india and you can get the same amount to USA in to Dollars.

      1. Why is everyone raving about NRE being tax free. No matter NRE or NRO you need to pay tax on interest (earned anywhere globally) in US right? For example if you are taxed 40% in US and India withheld 30% on your NRO interest you end up paying catch up tax of 10% in US. Or you end up paying entire 40% tax on interest earned in NRE account in US. What are we saying in NRE? Am I missing something?

        1. Check tax rate on income from interest and securities, this is much lower/different from tax rate from other income. so the above logic does not work.

  2. Hi
    I am employed abroad for two years. Can I open NRE account and take out the money from the bank in INR in India.

  3. dear one this is query wee bit out of the topic,
    how is money parked in safe havens across india such as cayman islands and swiss bank accounts.

  4. Hi,
    I have a question, kind of know the answer. But still would like to confirm. I have NRE account and we opened a regular FD on my wife’s name by issuing a check from NRE account. Is there a way to get back the money to NRE account by any chance? OR once the money is gone from NRE can’t be put it back ? Please let me know. Thanks,


    1. I haven’t encountered this situation but the rule is that you can fund the NRE account with money that’s repatriable in nature, so somehow you have to prove that the funds in your wife’s FD are repatriable. I don’t know how you could do that. I wish I had a more concrete answer but I don’t know much more beyond this.

  5. Hi Yeshwanth:

    I did some home work and spoke to a CA this time when I went o India for vacation. This is the information I gathered:

    Qucik answer: It is not illegal .. based on the info I got, disclaimer 🙂

    NRI account:
    1. Money will be in your name.
    2. Easy to get money back to USA if required.
    3. Advantage over taxing funds in account with respect to your relative/friend account in India.
    4. Not advise to keep more than $10,000 as there are some new IRS rules.

    Relative/friend Account:
    1. That relative/friend has to worry abt “gift tax”.
    2. Tough to get the money back to USA. More parer work, not exactly tough but time consuming.
    3. I think you can send max $13,000 per year. Limit is more/infinite to NRE acc I guess.
    4. Hope your relative/friend returns the money to you 🙂

    1. Also, once you become nri you should not transfer money to your savings account in India. You can send it to your friend or relative

  6. Hi,
    I am a citizen of India and I recently came to US on work visa. I will be working here for about an year. I want to transfer money to India to support my family. Can I transfer the money to my personal/salary account in India using any of the e-transfer sites such as a ? Is it against the law ?

    Thanking in advance for your response.


  7. I have NRO and NRE accounts. I want to buy a property in India. Can I issue NRO accountd for doing the same…

  8. Hi, I have a NRE Savings account & also a resident savings account (that i had opened in the past prior to going overseas. I should have ideally converted in into NRO Savings account but i didnt do it then). What i wish to know is, am i allowed to transfer funds from my resident savings account into my NRE savings account & repatriate the funds..? I am not a Indian citizen anymore. Thanks much if you can answer my query.

    1. To the best of my knowledge, if you’re not an Indian citizen then you shouldn’t even have a NRE or NRO account. You need to check this with a CA or lawyer who is an expert in this area to get an accurate answer.

  9. Can you please add thrw some light on

    1. Can we withdraw money in India from NRE account? If yes, what will the how will the currency conversion handled?
    2. Can we transfer money from NRE account to (say) a friend in India?

  10. Hi Manshu, Should I know the procedure to send approx. 100000 US $ to USA from NRE RS account. Purpose of the transfer is, one Indian who works in US wants to sell his property and asked the money by US $ in his US Account. We fixed the property value in RS and he wants same amount by dollar conversion and to be in his US Account. I have promised him that i can give him NRE Cheque and later he can transfer it to his account.. But he wants it in his US Account, And I contacted my bank & they have not given any clear answer. Is there any transfer limit or tax related issues in India or USA.. Thank you..

  11. 1) kindly inform wheather NRO or NRE account is worth for applying housing or car loan 2) I have an NRO account if NRE account is worth applying for any of these loan please help me 2 change my account 2 NRE account

  12. Hi Manshu,
    I am currently employed in India and have a normal local savings account(salary account). I have a running home loan that was taken to buy a property in India. My home loan is linked with the salary account. Now I am going abroad on an assignment and might be staying there for sometime. I wish to open a new NRE /NRO account with the same bank. My questions :
    1) Would future EMIs be deducted from my current salary account or the new NRE / NRO account?
    2) Should I go for NRO or NRE account, please suggest.
    3) Do I need to open a dollar account with a foreign bank there because company is going to pay me in dollar? And then transfer the fund to my current salary account by XOOM or something similar? Is this as an option advisable.
    4) My basic / biggest concern is how to pay in INR the future EMIs when I will be earning in dollars and won’t be available in India.
    Your inputs would help me immensely.
    Thanks & Regards

    1. Hi There!

      1. In the near term your EMIs will continue to be deducted from the existing account but as your status changes to NRI you will have to get in touch with your bank (the one that gave you the home loan) and redirect them to another account.

      2. NRE fixed deposits are better right now because the interest from them is tax free.

      3. Yes, that’s how it’s done. Your employer will assist in that. But you definitely need a Dollar account. Ask anyone in your company who’s already there. Yes, you will need to use a money transfer service.

      4. You will need to transfer money to Indian account. This is a fairly simple process, and you don’t have to be overly concerned with it. Just talk to someone who is already present wherever you’re going and they will tell you.

      Which country are you going to?

        1. Okay, then you will have to open an account to get your salary with a local bank like Citibank, Bank of America, Chase etc. and then give those details to your employer in what’s known as a direct deposit form. Your employer will automatically credit your account every pay cycle, which is usually 15 days in USA and then you are free to transfer money from that bank account to your Indian account using a money transfer service like Money2India or XOOM or whatever. It’s a very simple process.

  13. I have NRE account in India . Is it possible to transfer INR from any other NRE account? If yes ,do I need to provide my PAN details to them ( from where the fund is remitting ).

  14. hi
    i got transferred US dollars from USA to a domestic account a few months back. i am need of money, how can i get back the amount that i transferred to the domestic account, i now hold a NRE account, can i ask the bank to deposit the amount converting into US dollars to my NRE account from my domestic account, what is the procedure to be adopted to get the money back in US dollars.
    if amounts are deposited in NRE accounts, how the balance is recknowed i.e if suppose hundred US dollars are deposited, will it be rupees equivalent to hundred US dollars, which means if i deposit hundred US dollars into NRE account and if i withdraw again subsequently will i be getting hundred US dollars without any deductions.please clarify

  15. Hi Ranjan,

    I issued the check from my NRE (NRE Rupee account funded by dollar transfers from USA) account to a builder. After 3 months we changed our mind and asked for the refund. The builder has provided us the refund in Rupee Check.

    Ideally, it should go back to NRE since that is where the money was pulled. But since this is a rupee check, will there be any problem or additional paperwork?


  16. Hi,
    I have both NRE and NRO accounts. I wrote a Rupee check for buying a property in India. But a few months later I cancelled the deal. The builder has refunded the funds in a rupee check.

    I need to understand, WHERE WILL THIS CHECK GO? NRE or NRO account.
    a) Can I deposit Rupee check back to my NRE (the original source of funds)
    b)Do I need any spl permission?

    Please advise.

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