Like 11 12 Tweet 1

Income Tax
Non Resident Indians
Insurance
Financial Planning & Investment
Loans
Mutual Funds
News
Other
Real Estate
Shares / Equities
Financial Planning Demystified
www.RaagVamdatt.com
Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts for NRIs
May 5, 2008 by Raag Vamdatt
Check out the comprehensive Financial Planning Service by Raag Vamdatt, or check out all products & services.
We often hear about the two types of Non-Resident bank accounts NRE and NRO. We also keep hearing about the restrictions each has, like restriction on repatriation. This
article clarifies the difference between NRE and NRO accounts, and explains their characteristics.
All Non-Resident Indians (NRIs) face a dilemma at the beginning of their NRI status What kind of bank account should they maintain back home in India? Should it be an NRO
account, or should it be an NRE account? Can you have both? What can each be used for? Lets understand these things in detail.

Non-Resident External (NRE) Account
An NRE account is a Rupee denominated account. That is, funds in an NRE account are maintained in Indian Rupees. It can be a savings, current or a fixed / term deposit
account.
NRE accounts can be opened by NRIs.
Funds can be repatriated from an NRE account. This means that the funds can be freely sent to any other country.
An NRE account can contain funds remitted from abroad, or obtained from another NRE / FCNR account maintained in India.
Funds can be transferred from an NRE account to an NRO account without any restriction.
An NRE account can be held jointly, provided the other person is also an NRI.
The interest earned on deposits in an NRE account is exempt from tax in the hands of the NRI.
A resident power of attorney holder can not open an NRE account on behalf of an NRI. But the resident power of attorney holder can make local, rupee payments on behalf of the NRI.
Nomination is allowed for NRE accounts.
If the NRI holding the NRE account returns to India and becomes a resident of India, the NRE account is converted into a regular resident account.

Non-Resident Ordinary (NRO) Account
An NRO account is a Rupees denominated account. That is, funds in an NRE account are maintained in Indian Rupees. It can be a savings, current or a fixed / term deposit account.
NRO accounts can be opened by NRIs. Regular bank accounts of a person, who becomes an NRI, also get converted into NRO accounts.
Funds can not be repatriated from an NRO account. These funds have to be used only for local (within India) payments in Indian Rupees.
An NRO account can only contain funds received from within India.
Activate your account NOW
Start Forex Trading immediatly. Take the
market instantly.
acfx.com/Start-Trading-NOW
Register to Google+ SMS
You Can Now Use SMS to Send and
Receive Updates for G+. Try Now!
Google.com/Mobile
Zero Account Opening*
T&C apply. Online Share Trading Made
Easy with ICICIdirect.com.
www.icicidirect.com
Financial Planning Service Trainings MF Portfolio Analysis ULIP Review E-Books
Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
1 of 8 5/14/2012 11:42 PM
Can you achieve all your financial goals?
Check out my comprehensive Financial Planning Service - I would do a complete analysis of your personal finances, and help you achieve all your financial goals.
Click here for more details.
You can also have a look at all my products at the Personal Finance Products and Services Store.
Like 11 12 Tweet 1
Funds can not be transferred from an NRO account to an NRE account.
An NRO account can be held jointly with another NRI or with a resident Indian.
The interest earned on deposits in an NRO account is taxable in the hands of the NRI as per the applicable income tax slab rates.
A resident power of attorney holder can not open an NRO account on behalf of an NRI. But the resident power of attorney holder can make local, rupee payments on behalf of the NRI.
Nomination is allowed for NRO accounts.
If the NRI holding the NRO account returns to India and becomes a resident of India, the NRO account is converted into a regular resident account.

A quick comparison between NRE and NRO accounts
Non-Resident External (NRE) Account Non-Resident Ordinary (NRO) Account
Currency Rupee denominated Rupee denominated
Type Savings, Current or a Fixed / Term Deposit Savings, Current or a Fixed / Term Deposit
Who can open? NRI NRI, Resident before becoming an NRI
Is repatriation allowed? Yes Usually no
What can be the source of funds?
Funds remitted from abroad, Funds from another NRE / FCNR
account
Funds received from within India
Can funds be transferred to another account?
Funds can be transferred from an NRE account to an NRO / NRE /
Resident account
Funds can be transferred from an NRO account to an NRO /
Resident account
Can it be opened jointly with an NRI? Yes Yes
Can it be opened jointly with a resident? No Yes
What is the income tax treatment of the interest earned? Tax free Taxed as per applicable slab rate
Can power of attorney holder open the account? No No
Can power of attorney holder operate the account? Yes, can make local rupee payments Yes, can make local rupee payments
Is nomination allowed? Yes Yes
What is the status of the account when NRI returns to
India for good?
Converted to resident account Converted to resident account

Related Articles:
6 Basic Financial Things a USA Based NRI Should Keep in Mind
Your Income Tax and Tax Saving Investment Related Questions Answered
Not Cash, Not Travellers Cheques: Use Travel Card
Residential / Commercial Property for a Non Resident Indian (NRI)
What is American Depository Receipt (ADR) and Global Depository Receipt (GDR)?
Comments via Facebook
0 Facebook comments
Filed Under: Non Resident Indians Tagged With: NRI PIO
Comments
Anonymous says:
May 7, 2008 at 1:26 am
Nice summary. I had to go through the pains of understanding this from a surprisingly stupid officer at HDFC earlier this year. I feel you should take this forward. Also suggest which banks offer the best SUITE of
NR(E/O) accounts in terms of flexibility, usability and lack of red tape. By red tape I imply having to fill a PAPER form for every stupid thing you want to do (e.g.: Linking your NRE and NRO accounts to transfer
funds from NRE to NRO).
1.
Facebook social plugin
Comment Posting as Anup Gupta
(Not you?)
Add a comment...
Post to Facebook

Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
2 of 8 5/14/2012 11:42 PM
My small contribution towards this is that HDFC sucks. Everything is paper based and still they tell you that you can do everything online.
Another small tip Always open your NR accounts in the early days of your India trip & make sure that accounts work the way you want them before leaving. Otherwise you will end up feeling that SBI express
remit was the best thing to ever happen to you.
Best,
Bhalchandra
Shankar says:
February 19, 2009 at 11:24 am
Nice work..
2.
Sunil says:
July 17, 2009 at 1:14 pm
An officer from HDFC Bank tells me that my son who is
an NRI and has a NRE as well as a NRO a/c with HDFC
Bank can not open a D-mat a/c as long he is in US.
Whereas my son would like to invest his current savings
which he regularly tranfers from US to his NRE a/c at
HDFC Bank , in the shares in India so that his savings multiply
by the time he returns. Please advise whether it is legally
permissible for my son to open a d-mat a/c and link it
with his existing NRO a/c with HDFC Bank..
sunil
3.
Anonymous says:
July 20, 2009 at 1:00 pm
Hi Sunil,
I believe there is some dispute regarding taxation / double taxation between the Income Tax Department and the Internal Revenue Service (IRS) of USA.
Due to this, NRIs in USA can not invest in shares or Mutual Funds (MF) in India.
4.
Sunil says:
July 29, 2009 at 9:50 am
Thanks for clarifying that NRI in US can not invest in shares or MFs in India.
Please suggest as to what investments should be done by an NRI ( in US ) , in India , so that when he returns to the country after about 3-4 years , he gets the best benefit.
Sunil
5.
Anonymous says:
August 6, 2009 at 3:17 pm
Hi Sunil,
This is a great idea for a separate article I would write about it soon. Thanks for suggesting this!
6.
KALY says:
October 4, 2009 at 4:34 pm
I am a NRI and have invested 10 lacs INR in my wifes name in bank to get MIS for her monthly expediture.
Do I need to decalre it somewhere or it is not necessary. Is it legaly ok?
7.
Anonymous says:
October 6, 2009 at 1:59 am
Hi Kaly,
The information you have provided is not enough is your wife also an NRI? What do you mean by MIS post office MIS, or some other monthly income scheme?
In any case, it would be better if you confirm with a practicing chartered accountant (CA).
8.
Sunil says:
November 19, 2009 at 11:12 pm
Is there any development on the treaty between IT Deptt. and US IRS.
Please update.
Also , have you been able to work on the topic of Best Investment in India by NRIs in US .
regards,
sunil
9.
Shashank says:
November 20, 2009 at 10:01 pm
I am researching the most optimal and user friendly way for NRIs to invest in the Indian market. NRIs can invest in Indian market. I have provided info on my website:
http://www.profitshastra.com
Please let me know if there are any questions.

Shashank
10.
Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
3 of 8 5/14/2012 11:42 PM
Anonymous says:
November 25, 2009 at 1:34 am
Hi Sunil,
I dont think there has been any update on the issue between the income tax department and the IRS Very unfortunate
I havent been able to work on Best Investment in India by NRIs yet. But it would be available in a couple of months time
11.
Indrajith says:
December 10, 2009 at 5:41 pm
Dear Sir,
I am a NRI in the UK and I wish to send money to India for my family maintenance. Should I need to open any NRI account in India or can I send it to my mothers normal bank account using ICICI net express or
other facilities? Look forward to hearing from you.
Many thanks
Indrajith
12.
LATHA says:
July 25, 2010 at 4:32 am
HI,
IS IT COMPULSURY TO OPEN A NRE/NRO ACCOUNT BY A NRI MOVED OUT OF HIS COUNTRY FOR A LONG TERM PROJECT? WHAT IS THE IMPORTANCE OF NRI/NRO ACCOUNT? WHAT ARE
ALL THE BENEFITS? WITH OUT AN NRI/NRO ACCOUNT A NRI CANT TRANFER MONEY TO INDIA?
LATHA.
13.
Gopal Dureja says:
February 9, 2011 at 12:08 am
Excellent articles easy to understand for NRIs.
Can PIO/OCI open a Time Deposit or Monthly Income Scheme account in POst office? Under India Post web site, it only mentions about Senior Citizens Scheme which can not be opened by NRIs/PIO.
For All other accounts it says any individual can open it. Wont it amount to operating an NRO account ?
Similarly on LIC schemes such as Jeevan Akshay, can NRIs/PIO/OCI invest?
Many thanks
14.
Anonymous says:
February 5, 2011 at 7:50 am
A well written article indeed, but as a PIO I am still unclear as to which account I should remit the sale proceeds of my property in India, with a view to repatriation.
You say that NRE accounts accept only foreign remittances and money cannot be transferred from NRO to NRE. At the same time although the sale proceeds can be remitted to the NRO account, you say that
repatriation is not possible from this account! So where should the remittance be made in order to repatriate?
Titto Augustine says:
October 3, 2011 at 9:00 am
There is a Usually no in the table (towards Repatriation), which means Unusually yes! I hope you got it.
15.
nnisonarro says:
September 21, 2011 at 10:43 am
Great article, I just given this onto a co-worker who was doing a little research on that. And he in fact purchased me lunch because I discovered it for him
Raag Vamdatt says:
September 21, 2011 at 11:10 am
I am glad I could be of help
16.
owrenteri says:
October 9, 2011 at 10:47 pm
Great article, I just given this onto a co-worker who was doing a little research on that. And he in fact purchased me lunch because I discovered it for him
17.
commondude says:
December 5, 2011 at 9:57 pm
Can you suggest which banks NRE/O account is better? TIA
18.
sandeep says:
December 8, 2011 at 4:41 am
Pls help in clearing confusion on housing loan benefits and NRE /NRO account associted with it.
I have been assigned on long term project and dseputed to UK for about 18 24 months.
I had purchased a flat under construction linked plan and approx 25% payment was made while I was stillin India and the balance is to be paid through a housing loan with disbursement being done as per construction
timelines, which is expected to be completed in approx 30 months.
Will I be eligible for the tax benefits for principal payments
/interest payment.
19.
Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
4 of 8 5/14/2012 11:42 PM
The loan provider is asking for NRE /NRO account details, but I have only local account in India and a onsite salary acount. Part of the salary is credited in India and part onsite.
Pls advice : 1) How the housing loan benefits are to be claimed? 2) Do I require NRE /NRO account as indicated by the loan provider and 3) any safegaurds /conditions to be observed.
Gautam says:
January 4, 2012 at 11:52 pm
Hello.
My wife & I have been NRIs for over 7 years. However, We did not have an NRE account ever before. All our earnings are in my local countrys bank for this many years.Recently on my trip to India I opened an
NRE account. Can I transfer a sum of upto 2 crore into this newly opened NRE account without raising any flags. Kindly advice what I must do.
sa njeev kumar says:
January 8, 2012 at 12:01 am
You can remit any amount to NRE account. With rupee getting weeker by the day, RBI is encuraging inward USd remmitance.
20.
Amit Grover says:
January 13, 2012 at 10:28 am
The Reserve Bank has recently de-regulated the interest rates on NRE Deposits. Most banks have increased the interest rates. Oriental bank of Commerce is offering one of the best interest rates of 9.75% for a
period of 1 year. I found their services really good.
21.
Bonnie Reidar says:
February 1, 2012 at 9:26 pm
I am not an NRI. Is there any way for a foreign national to have an interest bearing savings account in an Indian bank? I once resided in New Delhi and had a rupee account, but no longer have residency.
22.
sameer says:
February 4, 2012 at 11:55 am
I have transferred money from nre to nro account. Though its in nro account now, source of money is nre ac. So whether it is taxable?
23.
PRADYUMNA SHARMA says:
February 20, 2012 at 3:18 pm
hello sir i have NRE a/c with hdfc bank and received salary from dubai in this a/c in india and used that money in india for payments, now is there any tax liability? please reply as soon as possible thank u
24.
Raag Vamdatt Featured In
Search This Website
Search
What Readers Have To Say
Home loans- Fixed & Floating - Beautiful article with laymans point of view.. & easily understandable language used.. Hats off to the author, as he maintained the momentum for making the reader understand.. what he
reads.. Will be a regular watcher & information grabber of this marvellous website
Shabbir
Personal Finance Topics
Products And Services

Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
5 of 8 5/14/2012 11:42 PM
"My Financial Plan"
Financial Planning Service


"Income Tax Formula"
Comprehensive Income Tax Training


E-Book: Personal Finance
for the Young Professional


Mutual Fund (MF)
Portfolio Analysis Service


ULIP Evaluation
Review of Your Existing ULIP


Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
6 of 8 5/14/2012 11:42 PM
ULIP Evaluation
Review Before a New ULIP Purchase

Current Poll
When did you file your income tax return?
June
July
August or later
Vote
View Results
1|" |Pdd s| 4|P 4| ( d| P 41 " P| !H|1 - H4| P|, H4| !H|"" d| |H 4 H|13 4 P P ( d| 4P|
Looking for a financial planner in India? Check out the "My Financial Plan" service.
Facebook
Find us on Facebook
Sandeep Ramakrishnan Cikgu Prashanth
Archana Nandan Kshipra Pallav
RaagVamdatt.com -
Financial Planning
Demystified
1,968 people like RaagVamdatt.com -
Financial Planning Demystified.
Like
Facebook social plugin
Main Menu
Financial Planning Service
Personal Finance Products & Services
Hindi Edition
Why Register?
About the Author
Contact Us
Financial Planning Home
Must-Read Articles
Reader Testimonials
Glossary of Terms
Polls
Media
Advertise
Partnership
Login
Username:
Password:
Remember me
Register
Lost your password?
Article Categories
Ads by Google
Nro a C
NRE Rates
Nro Deposit
Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
7 of 8 5/14/2012 11:42 PM
Financial Planning & Investment
Income Tax
Non Resident Indians
Insurance
Loans
Mutual Funds
News
Other
Real Estate
Shares / Equities
Popular Articles
Your Provident Fund (PF) account balance now available online
Saving Income Tax Understanding Section 80C Deductions
Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage
Long Term and Short Term Capital Gain Income Tax Calculation
Cost To Company or CTC salary: Understanding and Calculation
Provident Fund (PF) and Voluntary Provident Fund (VPF)
Budget 2010-2011: Service Tax on Property / House / Apartments / Flats
Income Tax (IT) treatment of House Rent Allowance (HRA)
Public Provident Fund (PPF) Plan Your Retirement and Save Tax
Long Term Capital Gains (LTCG) on Sale of a House Calculation and Income Tax
Recent Articles
Need for Financial Planning Why You Must Have a Financial Plan
Everything You Wanted To Know About Buying Health Insurance In India
6 Basic Financial Things a USA Based NRI Should Keep in Mind
Budget 2012 2013: Everything You Need To Know
Expectations from the Budget FY 2012 2013
Your Income Tax and Tax Saving Investment Related Questions Answered
Private Banking Stocks May See Renewed Interest
Save Income Tax by Caliming Deduction of Childrens Education Expenses Section 80C
Win a free financial plan, iPods and more Contest by a fellow blogger
Announcing Income Tax Formula Plus a Chance to Win Prizes Worth Over Rs. 10,000
Most Shared Articles
Cost To Company or CTC salary: Understanding and Calculation
77 1 161
Your Provident Fund (PF) account balance now available online
85 4 143
Budget 2010-2011: Service Tax on Property / House / Apartments / Flats
52 0 91
Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage
65 1 41
An introduction to Recurring Deposit
46 0 42
Saving Income Tax Understanding Section 80C Deductions
49 3 32
Fixed Deposits (FD) for saving income tax through section 80C
45 0 31
Long Term and Short Term Capital Gain Income Tax Calculation
34 0 39
Deduction for rent paid Section 80GG
28 0 29
Reached Section 80C limit? You can still save more income tax!
27 0 26
Know The Author
I am a financial planner catering to Indians worldwide. I am passionate about personal finance and financial planning, and believe in long term investment for achieving your financial goals. No wonder
stocks are my favourite!
[Read More ]
Personal Finance Topics
Budget Credit Card Credit Score Derivatives Fixed Deposit FMP Gold Health Insurance Income Tax Insurance Interest Rate Investment Basics ITR Loan MF NRI PIO PF Post Office PPF Product
Review Retirement Saving Scam SIP Spending Stocks Tips Tools ULIP
Article Archives
Disclaimer
Although the contents of the website are accurate to the best of my knowledge, users are advised to verify them independently before making investment decisions.
All logos and trademarks in this site are property of their respective owners. The comments and forum posts are property of their posters. Content directly linked to is property of respective websites.
All other content 2007-2011 www.RaagVamdatt.com - All Rights Reserved
Return to top of page
Copyright 2012 Nomadic Theme on Genesis Framework WordPress Log in
Non-Resident External (NRE) & Non-Resident Ordinary (NRO) Accounts... http://www.raagvamdatt.com/non-resident-external-nre-and-non-resident-...
8 of 8 5/14/2012 11:42 PM