💼 NRE vs NRO Account – Key Differences Explained (2025 Guide for NRIs)

Author: CA Pankaj Agrawal
Firm: M/s Pankaj Agrawal & Associates, Chartered Accountants, Indore (M.P.)
Last Updated: November 2025

---

🌍 Introduction

If you are a Non-Resident Indian (NRI) earning income abroad but maintaining financial ties in India, you must open either an NRE (Non-Resident External) or an NRO (Non-Resident Ordinary) account.

Both accounts allow you to manage income, investments, and remittances — but they differ significantly in purpose, taxation, and repatriation rules.

This guide explains NRE vs NRO accounts in simple terms, along with tax implications, FEMA rules, and compliance tips for NRIs.

---

🏦 What is an NRE Account?

NRE (Non-Resident External) Account is a rupee-denominated account that allows NRIs to deposit foreign income earned outside India.

✳️ Key Features:

• Funded only by foreign income (not Indian income).

• Account is maintained in Indian Rupees (INR).

• Freely repatriable — both principal and interest can be transferred abroad anytime.

• Can be held as Savings, Current, Fixed Deposit, or Recurring Deposit.

💰 Tax Benefit:

• Interest earned on NRE account is fully exempt from Income Tax in India under Section 10(4)(ii) of the Income Tax Act.

• Balance and interest are freely repatriable.

---

🏠 What is an NRO Account?

NRO (Non-Resident Ordinary) Account is meant to manage income earned in India, such as rent, dividends, pension, or sale proceeds of property.

✳️ Key Features:

• Funded by Indian income or transfer from NRE account.

• Held in Indian Rupees (INR).

• Can be held jointly with a resident Indian.

• Repatriation limited to USD 1 million per financial year (with CA certificate Form 15CA/CB).

💰 Tax Impact:

• Interest on NRO account is taxable in India @30% (plus surcharge and cess).

• TDS is deducted at source by the bank.

• Can claim DTAA relief while filing ITR.

---

⚖️ NRE vs NRO Account – Detailed Comparison

---

📑 Practical Example

Example:
Mr. Rajesh, an NRI working in Dubai, wants to:

• Save his Dubai salary in India → Open NRE Account

• Receive rental income from his Indore property → Open NRO Account

Both accounts can coexist and serve different purposes for financial management and compliance.

---

🧾 Taxation and Compliance Requirements

1. NRE Account:

• Interest income is tax-free.

• Not required to file ITR for this income in India.

• Must maintain NRI status under FEMA.

2. NRO Account:

• Interest income taxable in India.

• Must file ITR-2 if total income exceeds ₹2,50,000.

• For repatriation, need:

  • Form 15CA (by assessee)

  • Form 15CB (by Chartered Accountant)

---

🏠 FEMA Guidelines to Remember

• Once you become an NRI, convert your existing savings account into NRO account.

• Opening or maintaining a resident account as an NRI violates FEMA regulations.

• Always inform your bank about residential status change immediately.

---

💼 How a Chartered Accountant Can Help

At M/s Pankaj Agrawal & Associates, we assist NRIs with:

• FEMA compliance and bank account conversion

• 15CA/15CB certification for NRO remittances

• DTAA advisory for double taxation relief

• NRI income tax filing and refund assistance

📍 88 Jawahar Nagar, Near Rajendra Nagar, Indore (M.P.) – 452012
📞 7999028234
📧 pankajagrawal0116@gmail.com

---

🧠 FAQs on NRE vs NRO Account

Q1. Can an NRI open both NRE and NRO accounts?
✅ Yes, both can be opened for different purposes — foreign and Indian income management.

Q2. Can I repatriate funds from an NRO account abroad?
✅ Yes, up to USD 1 million per financial year with CA certification (Form 15CA/CB).

Q3. Is NRE account interest taxable?
❌ No. NRE account interest is completely tax-free in India.

Q4. Can a resident Indian be a joint holder in NRE account?
❌ No. Joint holding is allowed only with another NRI.

Q5. What happens to NRE/NRO accounts if I return to India permanently?
👉 They must be converted to resident accounts or RFC (Resident Foreign Currency) accounts.

---

🔚 Conclusion

Both NRE and NRO accounts are essential tools for NRIs to manage finances efficiently while complying with FEMA and tax laws.
Choosing the right account depends on the source of income — foreign or Indian — and your repatriation needs.

For professional help with NRI taxation, FEMA compliance, and 15CA/CB certification, contact our CA firm in Indore for end-to-end support.