Difference between NRE Accounts and NRO Accounts in India

NRE accounts can be opened by NRIs.

Joint account is permitted with another NRI.

Opening of NRE accounts jointly with residents is prohibited.

All type of accounts like current, savings, fixed deposits and recurring deposits are permitted under the scheme.

• Foreign Currency Remittance from abroad in the form of TT, MT, DD, Personal cheque etc. The draft should be in the name of the account holder and not endorsed in his favour. The cheque should be drawn by the account holder on a foreign currency account  maintained by him abroad.
• Proceeds of Indian Rupee drafts issued by Banks/Exchange Houses abroad.
• Proceeds of foreign currency notes/travellers cheques tendered by the account holder in person during his visit to India . If the value of foreign currency notes exceed US$ 5000 or its equivalent and if the value of travellers cheque and currency notes together exceeds USD 10000 or its equivalent it should be supported by currency declaration form issued by customs authorities.
• Interest/dividend/maturity proceeds of investment made in India on repatriation basis.
• Refund of subscription to shares/securities where original payment is made by remittance from abroad or by debit to account holders NRE a/c
• Transfer from NRE account of same person or another NRI.  

• Remittance from abroad through banking channel.
• Proceeds of foreign currency travellers cheques/currency notes by the account holder during his temporary visit to India.
• Loans/advances availed against NRE/FCNR deposit of the account holder.
• Proceeds of deposit/investment made on non repatriation basis.
• Any other legitimated dues to the account holder in India including sale proceeds of gold and silver brought from abroad

Withdrawals from NRE accounts are permitted for the following purpose.

• Local disbursements.
• Repatriation outside India in any form. However, repatriation in the form of travellers cheque/currency notes will be allowed for travel purpose only. Maximum value of currency note per person will be USD 2000 or its equivalent.
•  Investment in shares/securities/immovable properties other than for engaging in agriculture and plantation activities/real estates business)

Amount held in NRO account can be withdrawn for:  

• Local payments in Indian Rupee

• Investments in shares/securities immovable properties on non repatriation basis subject to general or specific permission of Reserve Bank of India.

NRE accounts can be operated by resident attorneys for withdrawal for local payments and investment in shares and securities covered by the general or specific permission of Reserve Bank of India.

Power of Attorney holders are not permitted to open NRI accounts or repatriate outside India funds held in the accounts. They are also not authenticated to makes gifts from NRE accounts.

Balance under NRO accounts can be repatriated outside India for any bonafide purpose, subject to production of declaration by the account holder under section 195 of Indian Income tax Act, duly verified and certified by a Chartered Accountant in the prescribed format subject to a maximum of USD 1.00 million per calendar year. Interest accrued on NRO account net of tax deducted at source can be credited to NRE account or repatriated outside India as and when required.

Normally, Income Tax @ 30.00% +3 % Education Cess ( total 30.90%) will be deducted at source by the Bank, on interest earned/paid in NRO accounts irrespective of the amount of Interest. The rates will be as per DTAA (Double Taxation Avoidance Agreement) agreed between India and various countries, in the case of depositors who are resident in those countries. Click here to see the list of countries and rates. This tax deducted at source can be claimed as refund by filing the return of Income as per Income Tax Act, provided the tax deducted is in excess of the tax due for the particular assessment year.

The TDS on interest earned on NRO deposit accounts shall be at 20% (for the current year the rate will be 20.60% including cess) only instead of 30% in the case of ONR accounts complying with the following conditions:

• The deposit should be made out of the remittances in foreign exchange received from outside India.

• The deposit should not have any amount deposited out of funds in India.

Advance will be granted up to 90% of the deposit, with a maximum of Rs. 100L. Loan can be repaid by remittance from abroad, transfer from NRE/FCNR/NRO account of the borrower or liquidation of the deposit.

Advance to the extent of 90% of the deposit can be availed at a rate of interest of over 2% above the deposit rate plus interest tax.