Savings Account Options for NRIs: NRE vs NRO Savings Account
As an NRI, if you wish to open a savings account to hold Indian currency, then an NRE or NRO savings account can be opened based on your requirements. Read further to understand the features and purpose of each one of them.
NRI savings account are meant for Non-Resident Indians (NRIs) who wish to park their funds in Indian currency with Indian banks. NRE (Non-Resident External) savings account allows you to hold your overseas income in Indian currency. With an NRO (Non-Resident Ordinary) account, you can manage your earnings generated in India. Both the accounts offer competitive interest rates and can be operated smoothly, with most banks offering services such as internet banking.
The foremost requirement for opening an NRE or NRO account is the status of being a Non-Resident Indian (NRI) or Overseas Citizen of India (OCI). You should be able to produce the required documents and ID proofs satisfactorily for opening any of these accounts.
Now let’s look at the key differences between the two accounts:
Purpose: NRE savings account allows you to deposit your money earned outside India in the form of Indian Rupee. It can be opened by professionals, businesspersons as well as students. NRO savings account allows you to maintain your funds that have been earned in India in the form of interests, pension, rent, etc. while you stay outside India. The deposit is held in the form of Indian Rupee.
Repeatability:The entire deposit amount, along with the interest earned, is fully repatriable in the case of an NRE savings account. In the case of an NRO savings account, the interest amount is fully repatriable after the deduction of applicable taxes, whereas the repatriability of the deposit amount is limited to one million USD for every financial year.
Joint Holding: You can jointly hold NRE savings account with another NRI. An NRO savings account can be held jointly either with another NRI or an Indian resident.
Applicable Taxes: The interest earned in case of an NRE savings account is fully exempted from tax in India whereas the interest earned on deposits in the NRO savings account is subjected to taxes as per the Income Tax Act. You may refer to DTAA guidelines for tax saving on your NRO savings account deposits.
Should I Opt for NRE Savings Account or NRO Savings Account?
NRE savings account is suitable if you wish to manage your earnings (in a foreign denomination) in the form of Indian currency to take advantage of the currency differences or other reasons. An NRO account is more suitable if you have income sources in India, such as property rent, dividends, etc. You can also jointly hold it with your family members or friends in India so that they can operate it independently.
Both the NRE and NRO savings account require you to maintain a minimum balance amount. The bank may levy service charges if you fail to do so. Hence, you must check for such requirements with your bank before opening the account. Lastly, choose a reputable bank with a good overseas presence and one that offers great banking services.