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Understanding the difference between NRI & NRE

Published On Dec 10, 2021, Updated On Aug 18, 2023

Navigating the financial landscape can be complex, especially when dealing with terms like NRI and NRE. As an individual with global connections, understanding these acronyms and their implications is crucial. In this blog, we'll delve into the distinction between NRI (Non-Resident Indian) and NRE (Non-Resident External) accounts, shedding light on their significance and how they impact your financial journey.

Difference between NRI vs NRE

Numerous individuals of Indian origin reside overseas and engage in consistent financial activities within India. Whether it involves investments or remittances to family members in the homeland, possessing an NRI account with an Indian bank simplifies these transactions. Maintaining an NRI account streamlines the process significantly regardless of the transaction's objective.

Who is an NRI?

In India, a distinct law explicitly addressing the visa status of Non-Resident Indians is absent. However, in common practice, this label is assigned to individuals residing outside India. Instead of a precise classification, the NRI designation is granted to those who aren't categorised as residents of India.

According to Section 6 of the Income Tax Act 1961, an Indian citizen is categorised as a resident if they have spent a minimum of 182 days in India during the preceding fiscal year or have resided for 60 days in the current year along with at least 365 days in the preceding four years. Those failing to meet at least two conditions from the aforementioned criteria are categorised as NRIs for the prior fiscal year.

In essence, if an Indian citizen resides abroad for a total of 183 days in a fiscal year, they are acknowledged as Non-Resident Indians. This article serves to elucidate the distinction between NRI and NRE, providing clarity on the subject.

About NRI Account

To initiate the process of establishing an NRI account in India, an individual must not meet the qualifications of an Indian citizen or, as stipulated by the Income Tax Act 1961, should remain outside the country for a minimum of 120 days in a specific year, and their total stay in India over the past four years should not exceed 365 days.

An alternate route to acquiring NRI status is by leaving the country for employment, which immediately confers NRI status.

Three distinct categories of NRI accounts exist, each characterised by unique attributes, facilitating a straightforward comparison between NRI and NRE. Hence, a comprehensive understanding of these types is essential prior to account initiation. These accounts provide avenues for depositing earnings from one's current country of residence or income earned within India, contingent upon the specific NRI account type selected.

Three Types of NRI Account

The trio of NRI accounts comprises NRE, NRO, and FCNR. Further elaboration on these and a comparison between NRI and NRE follow below:

1. NRE 

NRE, signifying Non-Residential External, accommodates earnings sourced from an NRI's current country of residence. A single stipulation applies: the earnings must be in Indian Rupees.

Illustratively, let's consider X, employed in Europe, supporting their Indian parents with a monthly deposit of 3000 Euros denominated in Indian Rupees. Assuming an exchange rate of 1EUR = 90 INR, the account would hold Rs. 2,70,000 (3000x90).


  • Facilitates foreign currency transfers, maintaining the balance in Indian Rupees.
  • Deposited amount is tax-exempt and repatriable.
  • Eligible to earn up to 4.35% annual interest on NRE deposits.

2. NRO 

A Non-Resident Ordinary Account accepts Indian-origin income held in Indian currency. Various income sources, such as dividends, rent, pension, or equity returns, are accommodated.

For instance, Y, an NRI with investments in Indian financial instruments, can deposit dividends and profits into their NRO account with no need for currency conversion as the deposits are in Indian Rupees.


  • Withdrawals are feasible only in Indian Rupees.
  • NRO account manages all earnings from Indian sources.
  • The annual repatriation limit is 1 million USD.
  • Foreign currency deposits are converted into INR based on prevailing rates.
  • NRO deposits are eligible for earning up to 5.5% annual interest.

3. FCNR 

Foreign Currency Non-Residential Account enables NRIs to deposit foreign currency denominated in RBI-listed currencies like CAD, USD, EUR, AUD, HKD, GBP, SGD, CHF, and JPY. No conversion is necessary for earnings in these currencies, whereas earnings in other currencies are converted to RBI-prescribed currencies.


  • Both the deposited amount and earned interest are repatriable.
  • FCNR permits holding currency in various listed currencies.
  • Deposits span 1-5 years and auto-renew upon maturity.
  • These deposits are exempt from taxation in India.

In summary, understanding the nuances of NRE and other NRI accounts empowers individuals to make informed financial decisions.

Benefits of NRI Accounts

Beyond the ease of depositing funds, NRI and NRE accounts offer an array of additional advantages.

  • Repatriation

One of the noteworthy advantages of these NRI accounts lies in their allowance for uninhibited fund movement. Both NRO and NRE accounts facilitate the transfer of money. The complete sum, including both principal and interest, can be repatriated abroad. NRE accounts allow unhampered repatriation, while in NRO accounts, funds are first subject to tax deduction before the remaining balance can be transferred.

  • FCNR Deposits

FCNR accounts offer the capability to deposit and retain funds in foreign currency, enabling the accrual of interest in foreign currency denominations. These funds remain exempt from taxation in India.

  • Tax Advantages

A comprehensive grasp of tax benefits aids in selecting the most fitting account for one's funds. Deposits within NRE accounts remain non-taxable in India. Conversely, funds lodged in NRO accounts are subject to applicable tax regulations. It's possible to transfer funds from an NRO account to an NRE account post-tax deduction.

  • Convenience

Initiating NRI accounts involves a straightforward and effortless procedure. This can be accomplished without even visiting the bank's physical Indian branch. Complete the online form, print it out, attach the necessary self-attested documents, compile the package, and courier it to the Indian bank.

  • Minimum Balance

The obligatory minimum deposit balance for these accounts has been substantially reduced. Most banks that extend NRI account services mandate a minimum balance of 10,000 INR.

Comparison of NRI Accounts

Each of the three account types has distinct characteristics that set them apart. The disparities between NRI, NRE, and NRO accounts can be summarised as follows:


  • Purpose: The NRE account is designed to hold earnings derived from the NRI's current country of residence, while NRO accounts manage income originating from Indian sources.
  • Joint Account: To open a joint account in an NRE account, both account holders must be NRIs. Conversely, in NRO accounts, an NRI can have a joint account with either an Indian resident or another NRI.
  • Tax Benefits: In NRE accounts, both the principal and interest are entirely exempt from taxation. In contrast, NRO accounts allow for income tax deductions on both principal and interest.
  • Repatriation: NRE accounts permit complete repatriation of the funds. In NRO accounts, interests can be fully repatriated, but the principal withdrawal is limited to 1 million USD per fiscal year.
  • Conversion Rate: NRE account balance is affected by current conversion rates, while NRO balances remain unaffected.


  • Deposit Denomination: NRE deposits are in Indian Rupees (INR), whereas FCNR account deposits are denominated in currencies prescribed by the RBI (SGD, EUR, AUD, HKD, JPY, CHF, GBP, USD, and CAD).
  • Tax Benefits: NRE accounts exempt the entire fund from income tax, whereas FCNR accounts only exempt the interest from taxation.
  • Purpose: NRE accounts receive deposits in INR from the NRI's country of residence, whereas FCNR accounts accept deposits in the RBI-prescribed currencies from NRIs residing in other countries.
  • Account Types: NRI and NRE accounts offer fixed deposits, savings, and current accounts. FCNR accounts only provide fixed deposit accounts with maturity periods ranging from 1 to 5 years.


  • Currency Denomination: NRO account balance is maintained in INR, while FCNR accounts hold funds in the RBI-prescribed nine currencies.
  • Tax Benefits: NRO accounts subject both interest and principal to tax deductions, while FCNR accounts only deduct tax from earned interest.
  • Purpose: NRO accounts are opened to manage earnings from Indian sources, whereas FCNR accounts are used to deposit earnings from the NRI's country of residence.
  • Repatriation: NRO accounts allow principal withdrawals of up to 1 million USD annually and full interest repatriation. FCNR accounts enable complete balance repatriation.
  • Joint Account: NRO accounts can be jointly opened with an NRI and an Indian resident, whereas FCNR joint accounts are limited to NRIs.

Eligibility Criteria for NRI Accounts

The individuals meeting the criteria below are qualified to establish NRI and NRE accounts:

  • Students pursuing education and degrees in foreign nations.
  • Individuals working in roles such as oil rig personnel, Indian Navy members, employees of overseas shipping companies, or staff of foreign-country registered airlines. Such jobs necessitate a minimum of 182 days of residence outside India.
  • Those who own businesses, engage in trade or are employed abroad.
  • Government employees holding diplomatic passports.

Documents Required

  • Proof of Employment
  • Visa Authorization, Student Visa, Employment Visa, Residency Visa, or Work Permit.
  • Photocopy of the main passport details page.
  • Bank Account Application Form
  • Optional Know Your Customer (KYC) Documentation

How do I Choose Which Account to Open for Myself?

The NRE and NRO accounts have distinct objectives. While the NRE account enables simple repatriation and transfer of funds, the NRO account is designed to hold income generated from sources within India. If you possess Indian income sources, selecting an NRO account is recommended. On the other hand, if your goal is to convert foreign earnings into Indian currency, the NRE account is a suitable option. Deposits in the NRE account accumulate tax-free interest and come with unrestricted repatriation benefits.


In conclusion, grasping the difference between NRI and NRE accounts is pivotal for global citizens seeking financial stability. The contrasting features, from tax implications to repatriation benefits, can significantly impact your financial strategy. As you embark on your international journey, make informed choices based on this newfound knowledge. Remember, whether NRI or NRE, a clear understanding will empower you to confidently navigate the intricate world of cross-border finances.


Q1: What is the difference between NRI and NRE accounts?

A1: An NRI (Non-Resident Indian) is a person who resides abroad, while an NRE (Non-Resident External) account is a type of bank account that holds foreign earnings in Indian Rupees. NRE accounts are designed to facilitate the repatriation of funds, whereas NRIs refer to individuals living outside India.

Q2: How do NRE and NRO accounts serve different purposes?

A2: NRE accounts are ideal for depositing foreign earnings that you want to convert into Indian currency, with tax-free interest and unrestricted repatriation. NRO accounts, on the other hand, are used to manage income earned from Indian sources and are subject to taxation.

Q3: Can I hold both NRE and NRO accounts simultaneously?

A3: Yes, NRIs can hold both NRE and NRO accounts. These accounts cater to different financial needs and objectives.

Q4: What are the tax implications of NRE and NRO accounts?

A4: In NRE accounts, both the principal and interest are tax-free. In NRO accounts, however, tax is deducted from both the principal and interest. Understanding these tax implications is crucial for managing your finances effectively.

Q5: What is the concept of repatriation in NRE and NRO accounts?

A5: Repatriation refers to the ability to transfer funds from an NRE or NRO account to a foreign account. In NRE accounts, full repatriation of funds is allowed, while NRO accounts have certain limitations on repatriating the principal amount.

Q6: Can I open an NRE or NRO account if I'm not an NRI?

A6: No, NRE and NRO accounts are specifically designed for Non-Resident Indians. If you are a resident of India, you would typically use regular savings or current accounts for banking purposes.

Q7: What documentation is required to open NRE and NRO accounts?

A7: Generally, you would need documents such as your passport, visa or work permit, proof of foreign address, and passport-sized photographs. Additionally, some banks might require KYC (Know Your Customer) documents for compliance purposes.

Q8: How do joint NRE and NRO accounts differ?

A8: In joint NRE accounts, both account holders need to be NRIs. For joint NRO accounts, an NRI can have a joint account with an Indian resident or another NRI.

Q9: Are NRE and NRO accounts suitable for different types of income?

A9: Yes, NRE accounts are better suited for converting foreign earnings into Indian currency, while NRO accounts are intended to manage Indian income sources.

Q10: Can I change my NRE account into an NRO account or vice versa?

A10: While some banks might allow you to convert an NRE account into an NRO account due to changing circumstances, the process can vary and might involve certain formalities. It's advisable to consult your bank for specific information.

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