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NRIs can open and maintain two types of accounts in India; NRE (Non-Resident External) or NRO (Non-Resident Ordinary). NRI can open either any of these two accounts or both of them with any Indian Bank.
Non-Resident External or NRE Bank account
NRE account acts like an external savings account opened by NRI. All fund transfers or credits to the NRE account should be in foreign exchange. Also, the fund balance in the NRE account is fully and freely remittable outside India.
Non-Resident Ordinary or NRO Bank account
An NRO account is an ordinary savings bank account for non-residents. All transactions in the NRO account should be in Indian currency or rupees. Funds from NRO NRI bank account is not freely remitted as NRI can remit upto USD 1 million each financial year. An NRO account is used to maintain the income earned in India.
| NRE Account | NRO Account | |
|---|---|---|
| Objectives | NRE bank account is opened to manage foreign earnings. | NRO Account is opened by NRIs to manage the income earned in India. |
| Tax | No tax, yes, balance as well as interest earned on NRE account is tax-free. | Interest earned on the balance left in the NRO account is taxable. |
| Repatriation limit | Principle along with the interest on the NRE account can be repatriated to foreign currency. | NRO account has repatriation restrictions, as NRI can remit a maximum of USD 1 million in a financial year to his foreign account. However, there are no repatriation restrictions on the interest amount. |