DIFFERENCE BETWEEN NRE AND NRO ACCOUNTS

NRE deposits are emerging as an attractive investment option, according to a report in the Business Standard today. “With global interest rates continuing to remain low, non-resident Indians (NRIs) can use the non-resident (external) rupee account (NRE) as an attractive option to park their funds,” said the report quoting experts. For those who can’t tell an NRE account from a Non-resident ordinary rupee account, here’s a quick guide. As an NRI you can open two kinds of rupee savings account in India

• Non-Resident External Rupee Accounts ( NRE Accounts )
• Non-Resident Ordinary Rupee Accounts ( NRO Accounts )

Non-Resident External Rupee Account  The Name itself representing that it is an account maintained by NRI in Rupee denominations. The NRI Generally will have foreign exchange earnings and he can deposit/ transfer the same to NRE Account. So, it is useful if NRI wants to park the overseas savings remitted to India after converting it to the Indian rupee. We will see some benefits of NRE Account as follows:

• The Principal and Interest earned are fully repatriated (send back to own country).
• Can be held Jointly by NRI’s.
• The interest so earned is exempt from taxes.

Non-Resident Ordinary Rupee Account This account should be used if the NRI is having income from India before or after becoming NRI. The So earned income should be deposited in NRO Account. Since the amount earned in India, the principal amount and interest earned are subject to tax. Also, the funds can’t be freely repatriated because this is Indian Income. As per RBI circular, the maximum funds can be transferred in a F.Y is USD one million dollar subject to conditions. Since the funds available in NRO Account are subject to taxability every NRI wants to transfer the same to NRE account. For this transfer, bankers will ask for CA Certificate and keep contacting us in getting the 15CB Certificate.