Why is it essential to open NRE and NRO account?


Different types of accounts and products are now available in the market for NRIs. If you are an NRI and wonder what option to choose, then you have come to the right place. The more options you get, the more confusion it creates. All the information you are going to get about the NRE and NRO account types will help you make a wise decision and choose the one that ticks the right boxes. An NRI (Non-Resident Indian) can’t open a regular Indian account. That is when NRE and NRO accounts come into the picture. Read on to find out why it is essential to open an NRO or NRE account.

NRE stands for Non-Residential External account, whereas NRO stands for Non-Residential Ordinary account. These are the two major account types available for you if you are a non-resident Indian. NRE bank account is the type of account that enables you to keep your foreign earnings in Indian denominations in India safely. NRO bank account is the type that keeps your earnings from India in Indian Denomination. These are the two most preferred account types for you if you are a non-resident Indian. The deposits you make in NRE accounts are tax-free, which means that the interest you earned and the principal amount is exempt from the tax. At the same time, the interest that you earned through the NRO account is subject to TDS.

Importance of NRE and NRO accounts

Transferring foreign income to India- NRO and NRE bank account can receive foreign currency credits and funds. If sending and receiving funds regularly as an NRI is your concern, then checking out NRE and NRO accounts can be some of the best options for you.

Repatriation of funds- The interest income and the principal amount that you earned on your NRE account will be able to repatriate without any restrictions. There are certain limits and restrictions when it comes to repatriating the principal amount, but the interest amount can be repatriated as quickly as it was with NRE accounts.

Receiving funds in Indian currency in your NRI account- If you earn Indian income as an NRI, then you may need to open an NRO account. You may be earning via business income, rental income or anything else; for that, an NRO account is a must for you.

Easy access for family- You may want your family to have access to the funds available in your NRI account, and for that, the best option available for you is to have joint operations. NRI or PIO can open an NRE account, and it can be operated jointly with an Indian resident relative (former or survivor basis)

Currency risk is eliminated- If the main motto of opening an NRE and NRO account for you as an NRI is to remit funds in India and utilize it in India itself, then the currency risk can be eliminated. It can be possible because the amount received in your account is directly converted to Indian currency, and the balance is carried forward in Indian currency after that.

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