NRI Account Types And Their Differences (2023 Guide)

NRI Account Types And Their Differences

Most individuals make the mistake of continuing a resident savings account even after becoming an NRI but the law does not allow it. Or in simple words, it’s illegal to hold a savings bank account for NRIs.

As per FEMA regulation, when a status changes to NRI the resident savings account have to be converted to a Non-Resident account.

This article explains the common NRI Account Types and their differences. You can also figure out which type of NRI account is ideal for you.

Most Common NRI Account Types

An NRI can choose from two options: an NRE or an NRO account. It would be advantageous to know how these two types of accounts differ and which one is right for you.

What Is An NRE Account?

A Non-Resident External (NRE) account is a bank account that is opened by depositing ‘External’ (foreign) currency at the time of opening a bank account.

In an NRE account, you can keep your funds in a rupee denomination.

With this account, the principal and interest earned are fully repatriated. Simply put, it will allow you to transfer funds from India to a foreign country seamlessly.

  • Such accounts can be jointly held with NRIs
  • You are allowed to make nominations as well
  • The interest that you earn is exempt from tax, that is it’s tax-free

What Is An NRO Account?

A Non-Resident Ordinary (NRO) account is the normal bank account opened by an Indian going abroad with the intention of becoming an NRI.

You can keep your funds in the rupee denomination here as well.

Unlike an NRE account, with an NRO account, your repatriation is allowed only under specific conditions. As per the RBI’s guidelines, you are permitted to repatriate only up to $1 million per financial year (April to March) for purposes like education, medical expenses and current income.

  • As per the RBI, you can hold an NRO account jointly with residents or non-resident Indians.
  • You are allowed to make nominations on the account as well.
  • The interest you earn is taxable as per Indian income tax laws.

Differences Between NRE And NRO Accounts

Non Resident External (NRE)Non Resident Ordinary (NRO)
Remittance from external sources onlyRemittance from external + local sources
The deposit is fully repatriableLimitations on repatriation
Interest is tax-freeInterest is taxable
The account can be jointly held with NRIs onlyThe account can be jointly held with NRIs + Residents
Funds can be transferred to NRE or NROFunds cannot be transferred to NRE

Which Account Should You Choose?

Choose NRE Account If You:

  • want to deposit your foreign earnings in Rupees
  • want to save tax on your interests
  • want your deposits to be freely repatriable
  • want to make a joint account with another NRI

Choose NRO Account If You:

  • want to deposit your earnings from Indian sources
  • have sources of income like rent, dividend, pension etc. in India
  • want to open joint account with a resident Indian

All income that is receivable in India such as rentals from property, investments, pension etc has to be deposited in the NRO account.

Any payment towards insurance premiums or EMIs on loans that you availed while in India also can be mandated from NRE/NRO account.

Any investment you make in India can be funded from NRE/NRO account.

Both accounts can be opened as Savings as well as Current accounts and are Indian Rupee accounts.

The ideal choice would be to open an NRE account for your foreign remittance and open another NRO account if you have income from India. This way you can maintain the advantage of the tax-free interest and limitless repatriation with the NRE account as well as do not have to worry about depositing from India with an NRO account.

FCNR Account

In addition to the above types of NRI accounts, there is another type of account called FCNR Account.

Foreign Currency Non-Resident Account (FCNR) is a kind of fixed deposit account opened for depositing income earned overseas. This account is held in a foreign currency such as USD, GBP, JPY, CAD, AUD, SGD, and HKD.

This type of account usually earns less interest than an NRE account. However, the deposits will be less exposed to the depreciation of Indian Rupees. If your chosen foreign currency appreciates against the Rupee you have the advantage in the long run.

FCNR deposits can be opened for tenures of 1 year up to 5 years.

  • Funds held in FCNR accounts are freely repatriable.
  • These accounts are generally exempt from TDS in India.
  • Most banks provide overdraft against FCNR deposits. The overdraft amount will be disbursed in Indian Rupees and the funds can be utilized in India only.

Interest is not paid if the deposit is prematurely withdrawn before completion of 1 year.

Copyright © – Full or partial reproduction of this article in any language is prohibited.

Reference: Reserve Bank of India

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23 thoughts on “NRI Account Types And Their Differences (2023 Guide)”

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  1. Anjan Bhattacharjee

    Me & Wife just got our Green card. We are retired.We have no remittance back to india. We have F.Ds for
    10 years + savings a/c. Can we change over to NRE a/c F.Ds ? We have also another savings a/c with 3 in 1
    Stock portfolio. Pl advise the best alternative for change.

  2. G.Ranganatha Rao

    I would like to convert mt savings account with State Bank of India into NRO account. What happens to my Fixed Deposits.Can it remain without any change in status?

  3. I am NRI since 1980 and has NRI account. Recently I wanted to add my wife as joint account holder as resident India. I was surprised to know the resident joint account holder is not authorised to operate the NRE account , as it used to be .If this is the case do not understand the provision of inserting the joint holder.

    1. your Wife could be as mandate holder to authorised and operate your account. open with ICICI then u will have 2 ATM card- 1st card for account holder and 2nd card for Mandate holder. your wife also can withdraw money with cheque book signed by herself.
      many benefit can be avail to mandate holder.

  4. Can i get Interest for NRE account, some of my friends are saying that i will not get any interest if i keep money on the NRE account and i need to transfer it NRO account inorder to earn Interest say 4% like wise, kindly clear

    1. Hi Sundar, The information you got is wrong. Both NRE and NRO accounts give interest similar to savings bank account (around 4% for most banks). The main difference is that you don’t have to pay tax on NRE account interest, while NRO account interest is taxable. At the same time you cannot deposit to NRE account from India, while NRO account deposits can be made from Indian and overseas.
      To get more interest you can open an NRE Fixed Deposit account (interest is around 7-8% for most banks), but your money will be locked for a period of at least 1 year.
      The account that does not give any interest is Current Account, which is mainly opened by business people residing in India.

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