What is difference between NRE and NRO account?

Feature

NRE Account

NRO Account

Meaning

NRI bank account designed to deposit/transfer funds from foreign bank account.

NRO bank account designed to deposit/transfer funds from foreign bank account or Indian bank account.

Purpose

To save, hold, park or invest foreign earnings in India.

Used to manage income earned in India, such as rent, dividends, pension, or any other income received in India in INR.

Account types

Can be opened in a Saving, current, FD or RD account form

Can be opened in a Saving, current, FD or RD account form

Repatriation

Allows transfer of funds (principal and interest) back to the foreign country without any restrictions.

The interest amount is fully repatriable after paying applicable taxes. The principal amount can be repatriated up to USD 1 million per financial year after fulfilling certain compliance requirements, including payment of applicable taxes.

PIS Accounts

NRE accounts can be designated as PIS accounts, allowing NRIs to invest in Indian stock markets on a repatriation basis.

NRO accounts can also be designated as PIS accounts for investing in Indian stock markets, but the investments and returns are non-repatriable, meaning the entire amount cannot be transferred back abroad.

Non-PIS

NRE Non- PIS account allows NRIs to invest in IPOs, pre-IPOs, and ESOPs.

NRO accounts can also be used for non-PIS transactions such as IPO, pre-IPO, mutual funds, real estate, government securities etc.

Taxation

Interest earned on the balance in an NRE account is tax-free in India.

Interest earned is subject to Indian income tax, which includes Tax Deducted at Source (TDS).

Currency Type

Maintained in INR.

Maintained in INR.

Deposits and Withdrawals

Deposits are allowed in foreign currency only, converted to Indian Rupees (INR). Withdrawals are made in INR.

Deposits can be made in both foreign currency and Indian Rupees. Withdrawals are made in INR.

Account Holding

It can be held jointly with another NRI. Cannot be held jointly with a resident Indian.

It can be held jointly with another NRI or a resident Indian.

Exchange Rate Risk

Subject to exchange rate risk the account is maintained in INR while the deposits are in foreign currency.

Also subject to exchange rate risk, but since it can accept deposits in INR, this risk is associated only with the foreign currency component.

Currency Conversion

Deposits in foreign currency are converted to INR.

Can accept both INR and foreign currency deposits, which are converted to INR if they are in a foreign currency.