Anyone who moves abroad but keeps ties to India soon meets two banking terms: NRE and NRO. They sound alike, yet they serve different purposes, and choosing the wrong one for a given type of money can cause tax and transfer headaches. This explainer lays out the general differences in plain language, based on how Indian banks and the Reserve Bank of India describe these accounts. It is not financial advice. Rules change, so check with your bank and the RBI before acting.
Who can open these accounts
Both accounts are meant for Non-Resident Indians, meaning persons of Indian origin who are residents outside India under foreign exchange rules. Banks usually ask for a passport, a visa or residence proof abroad, an overseas address proof and photographs. Many banks now let you start the process online from your country of residence.
What is an NRE account?
NRE stands for Non-Resident External. It is generally used to bring your foreign earnings into India. Deposits are made in foreign currency and held in Indian rupees. Banks describe the balance as freely repatriable, which means the principal and interest can usually be sent back abroad, subject to the rules in force. Interest is generally described as exempt from Indian income tax, subject to conditions, though your tax position in your country of residence still matters.
What is an NRO account?
NRO stands for Non-Resident Ordinary. It is meant to manage income that arises in India, such as rent from a flat, dividends, a pension or sale proceeds from property. It holds rupees only. Interest is generally taxable in India, and banks deduct tax at source. Moving money abroad from an NRO account is allowed in limited circumstances. Bank and RBI material mentions a ceiling of USD 1 million per financial year, subject to conditions and documentation such as tax certificates.
Side-by-side comparison
- Purpose: NRE for foreign income brought into India. NRO for income earned in India.
- Currency in: NRE accepts foreign currency, converted to rupees. NRO is funded in rupees, or foreign currency converted to rupees.
- Repatriation: NRE is generally freely repatriable. NRO is conditional and capped.
- Interest tax in India: NRE generally exempt. NRO generally taxable with tax deducted at source.
- Typical use: NRE for savings and fixed deposits. NRO for rent, dividends and local bills.
Joint holders and nominees
Banks generally permit joint accounts with another NRI, and many allow a resident relative as a joint holder on an NRO account, often on a former-or-survivor basis. For an NRE account, rules about resident joint holders are stricter. These details differ between banks, so ask yours for its policy.
What happens when you return to India
When you become a resident again, your NRE and NRO accounts are generally expected to be converted into resident accounts, while some deposits can run until maturity. Do not simply keep using them. Tell your bank when your residential status changes.
Questions to ask your bank
- What are the minimum balance and charges?
- What documents are needed for repatriation from the NRO account?
- Can I link my demat or investment account?
- How are joint holders and nominees treated?
Frequently asked questions
Can I transfer money from NRO to NRE?
Transfers from NRO to NRE are subject to limits and conditions set by regulation. Ask your bank which forms and certificates they need.
Do I need a PAN card to open these accounts?
Banks typically ask for a PAN or an alternative declaration. See our PAN card guide for NRIs.
Which account is better?
There is no single answer. They serve different purposes, and many NRIs hold both. A qualified tax adviser can look at your situation.
Is NRE interest tax-free in my country of residence?
Not necessarily. Indian exemption does not decide your foreign tax. Check with a tax professional where you live.
Related reading
Read more in the English section, see how to renew an Indian passport from abroad and the OCI card guide.
Not financial advice. Account rules, tax treatment and limits are provisional and may change. Check with your bank, the RBI and a qualified tax professional.
