So, what's the difference between NRE and NRO accounts?

NRE deposits are emerging as an attractive investment option, according a report in the Business Standard today. "With global interest rates continuing to remain low, non-resident Indians (NRIs) can use the non-resident (external) rupee account (NRE) as an attractive option to park their funds," said the report quoting experts. For those who can't tell an NRE account from an Non resident ordinary rupee account, here's a quick guide.

As an NRI you can open two kinds of savings accounts in India- non-resident rupee accounts (NRE), and non resident ordinary rupee accounts.

 So, whats the difference between NRE and NRO accounts?

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

NRE accounts:

Features: In an NRE account, you can keep your funds in 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 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.

Why: This account is meant for foreign exchange earned outside India and transferred to India. So, if you want to park your overseas savings remitted to India after converting to Indian rupee, this account will work for you.

NRO accounts:

Features: You can keep your funds in rupee denomination here as well. Unlike an NRE account, with an NRO account your repatriation is allowed only under specific conditions. As 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.

Why: This account is meant to keep the money you earn in India before or after becoming an NRI. So, if you are someone who has Indian earnings like rent, salary or dividends you can use this account to park those funds.

Also, you are permitted to transfer funds from NRO to NRE accounts and vice-versa.

Keep in mind that there are various types on NRE and NRO accounts. Those mentioned above are savings accounts. Keep tracking this space to know more about NRE and NRO -current, recurring and Fixed Deposits accounts.

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Updated Date: Dec 20, 2014 20:35:27 IST