Difference Between NRE And NRO Account

Last Updated: 18 Aug 2025

Globalisation is the new normal for the modern world. People migrate to other countries for better opportunities every day. Indians are well known for working and living in multiple countries. According to the Ministry of Foreign Affairs’ update released in May 2024, the global Indian diaspora numbered about 35.4 million, comprising roughly 15.85 million Non-Resident Indians and 19.5 million Persons of Indian Origin. Legally, Indians earning in a foreign country can not transact through a normal savings account. Special accounts like NRO and NRE have been facilitated for such transactions.

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What is an NRE Account?

A Non-Resident External (NRE) account is an Indian rupee-denominated savings, current, or term-deposit account that lets a Non-Resident Indian deposit earnings earned abroad in foreign currency, which the bank converts to INR, creating Exchange rate risk NRE account exposure. The balance and interest are entirely tax-exempt in India, fully and freely repatriable, and available across multiple deposit tenures.

It may be held jointly only with another NRI (a resident relative can be added solely on a former or survivor or power-of-attorney basis, per the Joint account rules NRE vs NRO). This makes it a core option among NRI banking account types for those who want to remit overseas income, invest locally, and maintain liquidity through Indian Rupee-denominated accounts without facing repatriation limits.

What is an NRO Account?

A Non-Resident Ordinary (NRO) account is an Indian rupee-denominated savings or fixed-deposit account that lets a Non-Resident Indian (NRI) park income earned within India, for example, rent, dividends, pensions, or sale proceeds of property. Both foreign currency and rupee funds can be deposited, but withdrawals are always in INR. Interest earned is taxable in India at applicable slab rates and is subject to 30% TDS, though Double Taxation Avoidance Agreements may reduce the burden.

An NRO account can be held singly or jointly with another NRI or with a resident close relative on a “former-or-survivor” basis, offering flexibility for local bill payments and investments. Because deposits and withdrawals occur in the same currency, there is negligible exchange-rate exposure. Overall, an NRO account suits NRIs who retain financial ties in India and need a compliant channel to manage domestic receipts while abroad.

Differences Between NRE and NRO Accounts

• The difference between NRE and NRO accounts is that an NRE (Non-Resident External) account holds overseas earnings remitted to India; an NRO account captures income sourced in India.
• NRE vs NRO account, both are Indian Rupee denomination accounts, but NRE accepts only foreign‐currency inflows that are converted to INR, whereas NRO accepts both foreign and domestic rupees.
• NRE & NRO account difference is that NRE interest and principal are fully tax-exempt in India, while NRO interest is taxable and subject to TDS.
• Funds from an NRE account are freely and fully repatriable anytime; NRO repatriation is restricted as above.
• Currency conversion on every deposit means an exchange rate risk NRE account exists; an NRO escapes this because funds already exist in INR.
• Joint account rules NRE vs NRO state that an NRE account can be jointly held only with another NRI (a resident relative may be added merely as “former-or-survivor” POA). An NRO account permits a resident Indian or another NRI as a joint holder, enabling easier bill payments for families in India.

How NRIs Invest in India?

The Foreign Exchange Management Act (FEMA) has rules for any foreign-earned capital that NRIs have to follow while investing in India. As per the law, NRIs are allowed to invest in stocks, mutual funds and real estate, etc. To access the capital markets, NRIs can opt for the Portfolio Investment Scheme or the Direct Subscription Route.

The Portfolio Investment Scheme introduced by the RBI is the primary mode of investment for NRIs. Through the scheme, NRIs can buy/sell stocks, debentures and other securities allowed by the RBI in India. NRIs have to choose between NRO and NRE accounts while investing, depending on the nature of the investment.

How to Open NRE and NRO Accounts in India

Now that you have understood the NRE & NRO difference, let’s explain how to open them.

1. Choose the bank and complete an online or branch application form indicating the desired account type.
2. Provide self-attested copies of passport, valid visa/OCI/PIO card, overseas address proof (utility bill, overseas bank statement), Indian PAN, and recent photographs.
3. Fulfil know-your-customer and FATCA declarations; some banks allow video KYC.
4. Fund the account:
   NRE – remit foreign currency from abroad or transfer from another NRE/FCNR(B) account.
   NRO – remit from abroad, deposit permissible rupee income, or transfer from an existing NRO.
5. Submit a specimen signature card and choose operating instructions (single, joint, former, or survivor).
6. The bank will allocate an account number and issue a cheque book, debit card, and internet/mobile banking credentials.

Processing typically takes 3–7 working days once documents are in order. Remember to notify the bank if residential status changes; the NRE account must be redesignated as resident or closed, while the NRO can convert to a resident account seamlessly.

How do These Accounts Operate?

Both NRE and NRO accounts operate similarly. The choice between the NRE and NRO accounts depends on whether the investment is repatriable or non-repatriable. While investing in India, NRIs have to indicate the method of investment.

If the payment method is repatriable, you have to opt for an NRE account; these deposits are fully repatriable. If the payment method is non-repatriable, you have to choose an NRO account. During redemption of the investments, if the investment is not tax-exempt, the tax is deducted at source.

If you want to send the amount out of India after redemption, you should opt for an NRE account before investing. NRIs have to maintain transparency while investing in India. The facility of redemption of capital invested from India is only available to NRIs, and thus, they must provide their overseas address while filling out the NRI banking form.

How Do I Choose Which Account to Open for Myself?

It’s crucial to have a detailed understanding of the NRE NRO account difference. An NRE account allows easy repatriability and transferability. The NRO account is used to maintain funds generated from Indian income sources, so if you have an Indian income source, opt for an NRO account. But if you just want to convert foreign income into Indian currency, the NRE account would be an ideal choice. NRE account deposits earn tax-free interest with no restrictions on repatriation of funds.

Conclusion

The Indian government provides a host of benefits to NRI investors. The biggest NRI account benefits with India Infoline include accounts that can be opened online through video verification and various tools being made available to the NRIs. With the variety of NRI investing tools offered by India Infoline, you can have a rewarding investing journey in India.

Frequently Asked Questions

Can students have an NRE or an NRO account?

Yes, students overseas can have a Non-Resident External (NRE) or a Non-Resident Ordinary (NRO) account.

What is the eligibility to open a NRE or NRO account?

To open an NRE or NRO account in India, the citizen needs to have lived outside India for 120 days or more. They also should have spent less than four years of the last 10 years living outside India.

What are the documents required for opening an NRE and NRO account?

List of documents required for opening an NRE and NRO account:

• Identity proof (Copy of PAN, passport)

• NRI status proof (Copy of visa, work permit, PIO, OCI)

• Proof of residence abroad

• Indian address proof

• Cancelled cheque

• PIS permission letter

Can we make INR deposits in NRE or NRO accounts?

Funds originating in India i.e. in Indian Rupees or INR can be deposited only in NRO Accounts and not an NRE Account. However, funds originating from a foreign country (foreign currency) can be deposited in both NRE and NRO accounts.