Jitesh Golani
Non-Resident External (NRE) Account
- An NRE account is a Rupee denominated account. That is, funds in an NRE account are maintained in Indian Rupees. It can be a savings, current or a fixed / term deposit account.
- NRE accounts can be opened by NRIs.
- Funds can be repatriated from an NRE account. This means that the funds can be freely sent to any other country.
- An NRE account can contain funds remitted from abroad, or obtained from another NRE / FCNR account maintained in India.
- Funds can be transferred from an NRE account to an NRO account without any restriction.
- An NRE account can be held jointly provided the other person is also an NRI.
- The interest earned on deposits in an NRE account is exempt from tax in the hands of the NRI.
- A resident power of attorney holder cannot open an NRE account on behalf of an NRI. But the resident power of attorney holder can make local, rupee payments on behalf of the NRI.
- Nomination is allowed for NRE accounts.
- If the NRI holding the NRE account returns to India and becomes a resident of India, the NRE account is converted into a regular resident account.
Non-Resident Ordinary (NRO) Account
- An NRO account is a Rupees denominated account. That is, funds in an NRO account are maintained in Indian Rupees. It can be a savings, current or a fixed / term deposit account.
- NRO accounts can be opened by NRIs. Regular bank accounts of a person, who becomes an NRI, also get converted into NRO accounts.
- Funds cannot be repatriated from an NRO account. These funds have to be used only for local (within India) payments in Indian Rupees.
- An NRO account can only contain funds received from within India.
- Funds cannot be transferred from an NRO account to an NRE account.
- An NRO account can be held jointly with another NRI or with a resident Indian.
- The interest earned on deposits in an NRO account is taxable in the hands of the NRI as per the applicable income tax slab rates.
- A resident power of attorney holder cannot open an NRO account on behalf of an NRI. But the resident power of attorney holder can make local, rupee payments on behalf of the NRI.
- Nomination is allowed for NRO accounts.
- If the NRI holding the NRO account returns to India and becomes a resident of India, the NRO account is converted into a regular resident account.
A quick comparison between NRE and NRO accounts
| Points of Difference | Non-Resident External (NRE) Account | Non-Resident Ordinary (NRO) Account |
| Currency | Rupee denominated | Rupee denominated |
| Type | Savings, Current or a Fixed / Term Deposit | Savings, Current or a Fixed / Term Deposit |
| Who can open? | NRI | NRI, Resident before becoming an NRI |
| Is repatriation allowed? | Yes | Yes |
| What can be the source of funds? | Funds remitted from abroad, Funds from another NRE / FCNR account | Funds received from within India |
| Can funds be transferred to another account? | Funds can be transferred from an NRE account to an NRO / NRE / Resident account | Funds can be transferred from an NRO account to an NRO / Resident account |
| Can it be opened jointly with an NRI? | Yes | Yes |
| Can it be opened jointly with a resident? | No | Yes |
| What is the income tax treatment of the interest earned? | Tax free | Taxed as per applicable slab rate |
| Can power of attorney holder open the account? | No | No |
| Can power of attorney holder operate the account? | Yes, can make local rupee payments | Yes, can make local rupee payments |
| Is nomination allowed? | Yes | Yes |
| What is the status of the account when NRI returns to India for good? | Converted to resident account | Converted to resident account |
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Is repatriation from NRO accounts allowed? No. (?)
This is not correct and misleads. There are many areas, for example, current income by way of interest, rent, dividend etc and also some capital account receipts in NRO accounts which are allowed to be repatriated. In this regard please refer to RBI Master Circular dated July 1, 2010, detailing remittance facilities allowed to Non resident Indians.C.C.Dayal.
Is repatriation from NRO accounts allowed? No. (?)
This is not correct and misleads. There are many areas, for example, current income by way of interest, rent, dividend etc and also some capital account receipts in NRO accounts which are allowed to be repatriated. In this regard please refer to RBI Master Circular dated July 1, 2010, detailing remittance facilities allowed to Non resident Indians.C.C.Dayal.
Is repatriation from NRO accounts allowed? No. (?)
This is not correct and misleads. There are many areas, for example, current income by way of interest, rent, dividend etc and also some capital account receipts in NRO accounts which are allowed to be repatriated. In this regard please refer to RBI Master Circular dated July 1, 2010, detailing remittance facilities allowed to Non resident Indians.C.C.Dayal.
Is repatriation from NRO accounts allowed? No. (?)
This is not correct and misleads. There are many areas, for example, current income by way of interest, rent, dividend etc and also some capital account receipts in NRO accounts which are allowed to be repatriated. In this regard please refer to RBI Master Circular dated July 1, 2010, detailing remittance facilities allowed to Non resident Indians.C.C.Dayal.
HII. I have read somewhere that Interest on NRO savings is taxed u/s 115A @ 20%.
Please clarify. Thanks.
I have read inyour web side that now NRE account can be opened with indian resident person.Here it says NO. WHY