NRE vs. NRO Accounts: How to Select the Perfect Account for Your Needs

Non-Resident Indians (NRIs) looking for NRI banking solutions may find it difficult to navigate the Indian financial system. This is where NRE account and NRO account walk in!

Non-Resident External and Non-Resident Ordinary or NRE and NRO accounts, offered by the State Bank of India, are two important account types especially offered to meet the needs of NRIs. These accounts offer distinct benefits and cater to different financial needs, helping NRIs transfer funds seamlessly, earn interest, and invest in Indian markets.

Keep reading to find out the difference between NRE and NRO accounts, their benefits, and how to select the best one based on your requirements. 

What is an NRE Account?

A Non-Resident External Account is a bank account that allows NRIs to conveniently deposit and manage their foreign earnings in India. It can be a current, recurring, savings, or fixed deposits account. 

One of the NRE account benefits is the ease of transferring funds from an NRE account to a foreign account without restrictions. Additionally, any foreign currency  remitted to an NRE account is automatically converted into Indian Rupees. 

• Eligibility For NRE Account Opening: NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) are eligible to open an NRE account.

What is an NRO Account?

A Non-Resident Ordinary Account is a type of bank account that allows NRIs, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) to manage income earned in India.

For example, if you earn income through rent, sell property, receive insurance maturity proceeds or monetary gifts in INR while living abroad, you can transfer these funds to your NRO account.

• Eligibility For NRO Account Opening: NRIs, PIOs, and OCIs are eligible to open an NRO account. However, foreign nationals employed in India should opt for a resident savings account instead of an NRO account.

Foreign students and tourists are also eligible under specific circumstances.

An understanding of the difference between NRE and NRO accounts is important for NRIs to manage their finances in India. The choice depends on factors such as the income sources, tax liabilities, and repatriation needs, as SBI NRO and NRE accounts offer distinct benefits.

Find the Best Fit Between NRE and NRO Accounts

Let us help you understand the basic differences and similarities between NRE and NRO Accounts.

Remitting Foreign Income to India

Both NRE and NRO accounts allow NRIs to receive foreign currency credits in India.

Protection Against Currency Fluctuations

The foreign currency is converted into Indian Rupees when deposited in both the NRO and NRE accounts, which remains unaffected by exchange rate fluctuations.

Taxation

Funds in NRE account and the related interest earned are not subject to taxes in India. Whereas interest earned in an NRO account is subject to taxes in India, with the applicable tax rate depending on current regulations.

Repatriation

The entire balance of NRE account is repatriable to overseas without any limitations. However, there are restrictions on the amount (up to US$1 million each fiscal year) that can be transferred overseas from an NRO account.

Joint Holders

A joint NRO or NRE account can be opened only with a Resident Indian (RI) who is a close relative, with 'Former (NRI) or Survivor' mode of operation i.e. the NRI must be the primary account holder.

What are the Steps for an NRI Account Opening Online?

SBI allows NRIs to open an NRE or NRO account online, offering a seamless way to manage funds in India from anywhere. Follow these simple steps to open your NRE or NRO account online with the State Bank of India:

• Visit the State Bank of India website and head over to the 'NRI' section.
• Choose between an NRE or NRO account and click on the ‘Apply Now’ tab. Alternatively, you may visit NRE or NRO for opening an account online.
• Fill in the necessary information and click on the ‘Submit’ button. You will receive a link to open an NRI account application form.
• Fill out the application form and click on the ‘Continue’ button. Then, upload the attested supporting KYC documents.
• Once the application and attested documents are received and verified by SBI processing centre in India, you will receive a notification confirming your new account details. 

Tips for Choosing the Right Account

As per Foreign Exchange Management Act (FEMA), NRIs are not permitted to maintain a resident savings account in their name. 

Therefore, NRIs can park their savings (earned in foreign currency) in an NRO or NRE account with a financial institution like SBI. Opting for an NRI account with SBI ensures reliability and convenience, backed by its extensive global presence and robust digital banking services.

SBI NRE and NRO accounts do not have minimum balance requirements, providing NRIs with more convenience and flexibility. The following tips will help you choose between an NRE vs. NRO account.

• Choose an SBI NRE Account if your primary income originates from abroad. It offers tax-free interest and seamless fund transfers to foreign countries.
• Opt for an SBI NRO Account if you earn income in India (e.g., rental income, dividends). It allows you to manage these funds while ensuring compliance with Indian tax regulations.
• Select NRE Account for easy fund transfers as it is designed for seamless transfers between India and foreign countries, making it ideal for managing your foreign earnings.

Your Path to Smart Financial Management

Before deciding between an NRE vs. NRO account, assess your income sources, financial goals, and repatriation needs. Choose wisely to make the most of your NRI account, ensuring it aligns with your overall financial strategy.

Disclaimer: Financial counsellors can help you understand the intricacies of NRE and NRO accounts and tailor a financial plan that fits your needs and risk tolerance.