NRE vs. NRO - What's the right bank account for NRIs?

NRIs can’t operate savings bank accounts that Indian residents typically use. In fact, NRIs are required to convert their savings bank accounts into NRO accounts when they leave India.

But there’s not just NRO account for NRI. There’s also NRE, FCNR, EEFC, RFC accounts that NRIs can maintain and use.

However, NRE and NRO bank accounts are two of the most important bank account types that NRIs should know about.

In this article, we help you understand each of these bank account types in depth. But more importantly, we compare them across various aspects so that you know which works better for what purpose.

What are NRE Bank Accounts?

NRE or Non-Resident (External) Account allows you to deposit foreign currency like USD, GBP and Euros into it. It then gets converted into INR at the prevailing exchange rate and sits in the account in INR domination.

The primary use of this account is to be able to deposit your foreign income and use it in India for transactions, payments and investments that need to be made in INR.

We discuss a few more use cases of NRE accounts in the comparison table later in the article.

Learn more about NRE FDs as a good investment choice for NRIs on our blog here.

Advantages of NRE Bank Accounts

✅ Interest earned by NRE accounts (as well as NRE FDs) is fully tax exempted

✅ 100% of money in NRE accounts can be repatriated out India

✅ You can transfer money from NRE accounts to NRO accounts

The comparison table later in the article discusses more advantages and aspects.

Your tax regime choice plays a key role in deciding which NRI account offers the best tax benefits. Read more about it on our blog here.

What are NRO Bank Accounts?

NRO bank accounts for NRIs are identical to savings bank accounts for resident Indians. In fact, when someone leaves India to become an NRI, they are required to convert their existing savings bank accounts into NRO bank accounts.

NRO or Non-Resident Ordinary Account allows you to deposit and manage your income (like interest and rent) earned within India.

We discuss different aspects of NRO accounts and compare them with NRE accounts for your understanding in the following table.

With NIFTY potentially reaching 25k, NRIs should evaluate their investment strategies, including understanding how repatriation rules apply. Read our blog on NIFTY @ 25k to explore more.

For NRIs, understanding the best ways to send money to India can complement their decision on whether to use an NRE or NRO account. Read information about this on our detailed blog here.

The type of bank accounts available varies significantly between NRI, PIO, and OCI statuses, which are detailed in the Who is NRI vs PIO vs OCI article.

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Comparing NRE vs. NRO Bank Accounts

Aspect	NRE Bank Account	NRO Bank Account
Who can open and operate?	NRI/PIO/OCI	Any person who is a resident outside of India (Pakistan and Bangladesh resident require prior approval from the RBI)
Primary use	Income earned outside of India can be deposited into NRE accounts and repatriated without any restrictions	Your existing resident savings accounts need to be converted into NRO accounts when you become an NRI. The NRO account is primarily used to deposit Indian income since it has restrictions on repatriation
Other important uses	Receive transfers from other NRE accountsReceive investment withdrawal credit (only if invested from NRE account) Income from Indian sources (rent, interest etc.) can be credited into NRE accounts with approval from a qualified Chartered Accountant	Manage your Indian transactions and payments with Indian income You can even deposit money that you have earned outside of India into NRO accounts Receive credits from your NRE bank accounts and use it in India
Deposit currency	Foreign currency (earned outside of India)	INR (earned within India)
Withdrawal currency	INR	INR
Is a joint account possible?	Yes ✅	Yes ✅
Who can be a joint account holder?	Another NRI/PIO/OCI can be a joint holder A resident relative, in accordance to the RBI guidelines, can also be a joint holder in NRE accounts	Another NRI/PIO/OCI can be a joint holder A resident relative, in accordance to the RBI guidelines, can also be a joint holder in NRE accounts
Interest rate*	2.70% (for amounts up to ₹10 crore) \| 3.00 (for amounts above ₹10 crore)	2.70% (for amounts up to ₹10 crore) \| 3.00 (for amounts above ₹10 crore)
Repatriation restrictions	No restrictions - 100% of NRE account balance repatriable out of India at your will	Maximum of $1 million is repatriable out of India per year
Tax on interest earned by the account	No tax since deposits are not earned in India	Interest is taxable at the marginal tax rate based on your income in India
Tax on wealth and gifts	No wealth or gift tax	Wealth and gift tax applicable
TDS applicable	No	31.2% (can be claimed back if your marginal tax rate is lower)