NRIs (Non-Resident Indians) who earn income both domestically and overseas often find it difficult to manage their finances. Moreover, they have difficulty transferring money back to their domestic accounts and tracking down foreign bank accounts. NRE and NRO accounts can solve all these problems.
The purpose of this article is to help you understand the difference between NRE and NRO accounts, and how to select between these two types of bank accounts.
It is not possible for an NRI to open a savings account in their name in India. The recipients must convert all their savings (money earned abroad) to a non-resident external account (NRE) or a non-resident ordinary account (NRO). In the event that the savings account is still used, hefty penalties may apply. For non-resident Indians, opening an NRE or NRO account is a viable option.
Indians benefit from these accounts in two ways:
- It is possible for NRIs to send their foreign earnings to India.
- They can also control their earnings from India in the home country itself.
What is an NRE (Non-Resident External) Account?
Indian rupee-denominated NRE accounts offer complete security. It can be a savings account, current account, recurring account, or fixed deposit account. The money deposited is converted into Indian rupees. You can transfer funds from an NRE account to a foreign account without any complications. In order to deposit money into these accounts, you must earn money outside of India. Using this account, you can carry out business, make investments, and do personal banking.
What is an NRO Account (Non-Resident Ordinary Rupee)?
It is possible for NRIs living outside of India to open an NRO account to manage the money they receive in India. It can be a savings account or a current account. This account lets account holders to deposit and manage the money they have accumulated in rupees without any hassle. A joint NRO account can be opened with an Indian or another NRI. It is also possible to transfer funds from your NRE account to this account. The interest you receive in this account is subject to TDS (Tax Deducted at Source).
Transferring money from an NRO account to an NRE account
- It is important to pay all applicable taxes.
- You can only transfer money if your taxes are settled.
- The NRO account’s funding source should be transferable and returnable.
- Documentation Needed for Fund Transfer from NRO to NRE must be completed. NRIs must submit Form 15CA.
- Form 15CB is an application needed to submit to the bank branch. This is required to transfer money from an NRO account to an NRE account.
Final Words
NRE and NRO accounts allow you to do transactions and withdraw funds around-the-clock using an international debit card. Connecting your NRE account to your investment account will simplify overall order processing. People open NRE accounts largely for conducting business, doing personal banking, and making investments. You can take RemitX’s professional assistance to complete the NRO and NRE account application process.