NRE vs NRO Accounts: Choosing the Right Savings Account for NRIs
Moving to a different country entails many decisions, and if you are an Indian expatriate, one such crucial choice revolves around selecting the right bank account to manage your finances. The Indian banking system offers two primary types of accounts designed specifically for Non-Resident Indians (NRIs): Non-Resident External (NRE Account) and Non-Resident Ordinary (NRO Account). Understanding the differences and similarities between these accounts is paramount in making the right choice.
What is an NRE Account?
An NRE account is a type of savings account that NRIs can open to deposit foreign income earned outside India. One of the primary advantages of an NRE account is the repatriation of both the principal amount and the interest earned, which essentially means you can transfer your funds back to your overseas account without any restrictions.
Furthermore, the interest earned on the funds in an NRE account is tax-free in India, providing an efficient way for NRIs to save and grow their foreign income. However, the funds in this account must necessarily be maintained in Indian National Rupees (INR.)
What is an NRO Account?
Unlike an NRE account, an NRO account is designed to manage the income earned in India, such as rental income, dividends, or pension. While NRO accounts also offer repatriation benefits, they come with certain limitations. The repatriation of funds from an NRO account to an NRI account is restricted to $1 million per financial year, and the account holder is also required to submit a certificate from a chartered accountant declaring that all necessary taxes have been paid, such as TDS rate, deductions, and the applicability of DTAA.
The interest earned on the balance of an NRO account is taxable under the Indian tax laws. Like NRE accounts, NRO accounts also maintain funds in Indian Rupees.
NRE vs NRO Accounts – Which One to Choose?
Your choice between an NRE and NRO account should hinge on your source of income and repatriation needs. If your income is primarily generated abroad and you require unrestricted repatriability, an NRE account would be the best fit.
On the other hand, if you have income originating in India, an NRO savings account is a better choice. It allows you to deposit your earnings from India and repatriate a limited amount post-tax deductions.
Benefits of NRE and NRO Accounts
Access to Funds by Family Members
If you want your family members residing in India to have easy access to your account, both NRE and NRO accounts offer this convenience. Many banks, such as ICICI Bank NRI services, provide a mandate card and a cheque book to your family members, giving them convenient access to your account.
Interest rates on both NRE and NRO savings accounts are typically similar, although they may vary slightly based on the bank. It's wise to check the prevailing interest rates before deciding on the account type.
Experience the Advantages of ICICI Bank NRI Services: Open an NRE or NRO Account Today
Opt for the NRE Savings Account from ICICI Bank NRI Services for its lucrative features:
- Earn attractive interest rates of 3.5% per annum on the end of day balances equal to or above INR 50 lakh and 3% per annum for balances below INR 50 lakh.
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- You can hold the account jointly with another NRI for added convenience.
Alternatively, choose the NRO savings account from ICICI Bank NRI services for great benefits such as:
- A low required balance, only INR 10,000 per month.
- With a domestic ATM-cum-Debit card, enjoy the convenience of over 11,000 ATMs and over 3,000 branches across India.
- You have access to phone and 24x7 internet banking.
- Additional advantages include a free chequebook and ATM Card for the mandate holder.
NRE vs NRO – choosing the right account requires careful consideration of your financial circumstances and plans. Each account type offers specific benefits tailored to different financial needs.
An NRE account is beneficial for those who wish to maintain savings in India from their foreign income and enjoy tax-free interest along with the flexibility of repatriating their funds freely. On the other hand, an NRO account is ideal for those who have income sources in India and wish to deposit and manage these earnings effectively.
Consider your source of income, tax liabilities, need for repatriation and the ease of access for family members when choosing between these two account types. Your choice of a banking account as an NRI can significantly impact your financial management efficiency. The choice depends on your unique financial situation and goals. It is a good idea to consult with bank representatives who can help clarify your doubts and guide you towards the right decision.
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