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Understanding the difference between NRI & NRE

Published On Dec 10, 2021 10:00 AM By InsuranceDekho

An Non Resident Indian (NRI) is an Indian Citizen who resides in India for less than one hundred & eighty two days during the course of the preceding financial year, or. who has gone out of India or who stays outside India for the purpose of employment. 

An NRE account is a bank account opened in India in the name of an NRI, to park his foreign earnings; whereas, an NRO account is a bank account opened in India in the name of an NRI, to manage the income earned by him in India. An NRI can open a joint NRO account with one or more NRIs or Indian citizens.

We understand that Non-Resident Indians like you have several financial needs. These include managing wealth and saving for the future. If you have the right bank account, you can utilize your savings for investments, sending money to India and repatriation. The best way to carry out these transactions is through NRE and NRO accounts. Let us take a look at the features of both these accounts.

Six Differences Between NRE And NRI Accounts

1. Definition

NRE stands for Non-Resident External and you can use it to deposit funds that you earn abroad in a foreign currency. In contrast, you can use a Non-Resident Indian (NRI) account to manage income and funds that are generated in India in Indian rupees.

2. Taxability

A significant difference between NRE and NRO accounts is that the interest earned in an NRE account is tax-free in India, while you have to pay income tax on interest earned from an NRO savings account in India.

3. Withdrawals and Deposits

An NRE savings account allows deposits in foreign currencies. An NRI savings account is primarily for deposits in INR; although it enables deposits in other currencies as well. You can make withdrawals only in INR from both accounts.

4. Repatriability

You can repatriate funds (principal and interest) from an NRE account freely and completely. If you want to repatriate funds from an NRI account, the limit is USD 1 million in a financial year.

5. Account Opening Purpose

You may want an NRE account if you have family back in India and wish to take care of their expenses. It makes the remittance transactions seamless and the account also allows you to get better interest rates than what is currently prevailing in most developed countries. An NRE account will also come handy if you intend to repatriate the funds to your current country of residence.

An NRI account is great if you wish to deposit your income from India. This could be rent from your residential property in India or interest from Indian fixed deposits and other assets. You can also use the account to make investments and pay for bills or other purchases in India.

6. Holding Structure

You can hold an NRE account jointly with another NRI family member; you can also have a resident joint account holder only in former or survivor mode of operation. You can hold an NRI account jointly with another NRO or resident Indian relative.

Conclusion

Though there are several differences between an NRE and NRI account, you will need both to manage your funds. An NRE account proves useful for your foreign earnings and you can even send money back to your country of residence freely. An NRI account helps keep your income earned in India safe and within India.

Do read - NRI - Understand The Term NRI

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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