An NRI has the option to open two distinct types of bank accounts to manage their finances in India, namely the Non-Resident External (NRE) account and the Non-Resident Ordinary (NRO) account. Each account serves different purposes and comes with its own set of features and regulations.
Comparison Between NRE and NRO Accounts
Criteria | NRE | NRO |
Purpose | Used by NRIs to invest income earned abroad in Indian capital markets. | Allows NRIs to invest income earned within India in Indian capital markets. |
Repatriation | Both principal and interest are fully repatriable. | Interest is fully repatriable; principal repatriation is restricted to USD 1 million per financial year. |
F&O Trading | Not permitted to be used for trading in any derivatives. | Can be used to trade in Equity F&O segment through a Custodial Participant. |
Transfer | Funds can be transferred to NRO account. | Transfers from NRO to NRE accounts are not permitted. |
Taxability | Interest earned on Investments in the NRE A/c is Tax-Free. | Interest earned on Investments in the NRO A/c is Taxable. |
Deposits & Withdrawals | Allows deposit and withdrawal in both INR and foreign currency. | Deposits can be made in both INR and foreign currency, but withdrawals are only in INR. |
Note: Repatriation refers to the process of transferring funds from India to the account holder's country of residence.
If you're an NRI looking to open an account that best suits your investment needs, we invite you to begin the account opening process with FYERS by submitting your details here.