subject: An Easier Understanding Of Nre, Nro And Nri Accounts Today. [print this page] A lot of people are confused about NRI Accounts, NRE Accounts and NRO Accounts today. A better understanding of the similarities and differences among all these will lead to you making a choice that is educated and informed.
The first thing to know is that both NRE (Non-Resident External) and NRO accounts (Non-Resident Ordinary) are, in fact, NRI accounts (or accounts held by a Non-Resident Indian). In other words, an NRI can hold either one or both the others.
- What is an NRE Account?
An NRE Account is an account opened by only an NRI, by depositing foreign currency, which is then converted to Indian Rupees. This can be of any type a savings account, a current account, fixed deposits or even recurring deposits.
- What is an NRO Account?
An NRO account can either be opened by an NRI or a person whos going abroad with the plan of becoming an NRI. This account, too, can be a savings, current, fixed deposits or recurring deposits one, however the deposits to this account can either in rupees or foreign currency. Also, keep in mind that this account can be opened by an NRI, a resident intending to become an NRI or even a resident and NRI jointly.
Despite being quite similar, these NRI accounts differ in quite a lot of ways. Knowing these differences will help you in choosing the best NRI account for you.
- Deposits and Withdrawals
In an NRE account your deposits can only be in a foreign currency. Opening this account is, also, only possible by making a foreign currency deposit. In an NRO Account, however, your deposits can be in either foreign currency or Indian rupees.
Withdrawals in both these accounts can only be made in rupees.
- Tax or No Tax
In an NRE account, neither your income nor your credit balance will be taxed. However, in an NRO account, the interest earned is taxed based on the account holders tax bracket. The credit balances in this account are also taxable.
- Transfers
As an NRI account holder you can always transfer funds from your NRE account to your NRO account. Its an easy process and involves absolutely no complications. Transferring from an NRO account to an NRE account is another story altogether. It is not possible todo that unless you fill out a few RBI forms and get their permit.
Similarly, while you can send funds to an NRO account in India, it is not possible to send back the funds abroad from India (unless you have RBI permissions). In an NREaccount, however, your funds are repatriable too, (i.e. they can be sent back and forth from your home country to India).
An easier understanding of NRE and NRO accounts should help you to make a choice on your best NRI account. However, it is always advisable to speak to your bank as they might have special rates and offers for different account holders. Make sure you pick whats right for you.
