Updated: Jan 21, 2022
If you’re someone who has just moved our of India or is planning to move out of India it is important for you to open either an NRE or an NRO account. For someone who has been out of India for a while and still doesn’t have either of these accounts it is important that you do not have any other Savings account in India.
Why is it important to have an NRE or NRO account for NRIs?
As per RBI Regulations, a Non-Resident Indian (NRI) cannot open and operate a regular resident Savings Account and further, any account should be converted into NRI Account by the bank before one gets NRI status. Continuing to use the savings account in the home country can attract hefty penalties. Opening an NRE or NRO account is, hence, a viable option for Non-Resident Indians.
Now that we understand why we need to have either of these accounts, let’s understand both NRE and NRO accounts separately and then we can compare them and decide which one to go for based on our needs.
What is an NRE Account?
NRE or Non-Resident External account is used to park your foreign earnings or fund and is help in Rupees. The account can be a Savings, Current, Recurring or Fixed Deposit.
With an NRE account, you can deposit your foreign earnings into this account from your country of residence. The amount that is deposited in the foreign currency is converted into Indian rupees as per the prevailing exchange rate.
You can also appoint an Indian resident as POA or Power of Attorney for your account. They will be able to use the debit card and cheque books. Please note that this is not the same as holding a joint account. You can open a joint NRE account only with another NRI and not with an Indian resident.
The biggest advantage of NRE account is the both the principal and the interest are tax-free in India. The rate of interest is decided by the Department of Banking regulations.
Another important advantage of this account is that any amount if fully repatriable (or can be sent to your foreign account) to your resident country tax-free.
What is an NRO Account?
A Non-Resident Ordinary (NRO) account can also be in the form of a savings account, current, recurring or fixed deposits. The basic difference between NRO and NRE account is that while NRE account accepts on foreign currency, an NRO account accepts both foreign as well as Indian currency and the balance is held in Indian rupees. It can be held jointly by two NRIs or can be held jointly with an Indian resident.
So basically, any NRI that still has a source of income in India, for example, you have tenants in a flat that you own in India, this is a good account to deposit the earnings. The NRO account can take remittances from outside India, certain cash amounts and transfers from other NRO accounts.
An NRO account is subject to taxes in India. As a result of this, this account is best suited for those who do not intend to send their balances out of India.
You can also open this account jointly with any other Indian resident.
Banks typically levy a fees for maintaining both types of accounts. So, do check with your bank about the applicable feed.
How to open an NRE/NRO account?
Either of the accounts can be opened online or in person. Most commercial banks have online applications that can be filled in as a starting point of the process. After filling in the initial form, you are usually contacted by a bank representative to complete the rest of the formalities.
It is also possible to open these accounts during your visit back home by visiting the bank in-person.
You need to have a PAN card to open either of these accounts. Since the Aadhaar card is only issuable for those that reside in India for 182 days or more within the past 12 months, it is not required for NRIs to open an NRI account.
Documents required to open an NRE/NRO account
PAN Card copy
Copy of Visa / Work Permit / Green Card (permanent residency card
Passport photograph (Usually just 1 is enough. But you never know. Keep more photos handy)
Overseas address proof
Indian address proof
It is advisable to check with your banks for specific requirements. If you’re applying from abroad, chances are you might need to get your documents attested at the Indian embassy or signing authority of a commercial bank branch registered in India.
If possible, open this account when you’re next in India.
Depositing Money in NRE/NRO account
There are 3 ways to deposit money in these accounts:
1) Transfer / Remit from your foreign bank account
2) Deposit physical currency at the bank
3) Transferring funds from an existing NRE account in another bank in India
Penalty for not converting to NRO account
The penalty for violation of not converting would be up to 3x the sum involved, or up to 2 lakhs if the amount is not directly quantifiable. If the situation continues without resolution, the penalty can be compounded up to 300% of the amount.
To save yourself the risk of these penalties, we suggest converting your accounts at your local bank as soon as possible. It is your responsibility to inform the bank of the change in your residential status and to complete the paperwork to change the accounts.
We hope you found this Guide useful and informative.
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Some Toll free Customer Care numbers of Indian Banks that can help in NRE / NRO account creations.
ICICI NRI Customer Care:
USA: 1866 42424 48
Singapore : 800 101 2553
UAE8000: 9114 001
NRIs When in India: 1800 102 56 00
Pre Account Opening Toll-free: 1866 703 2462
Email firstname.lastname@example.org for pre-account opening queries
Pre Account Opening Toll-free: 1-866-703-2462
Pre Account Opening Toll-free: 8000-172-122
Post Account Opening Toll-free: 800-035703463
India+91 22 4955 2484
Toll-free from UK: 0800 032 2484
Toll-free from Europe: 00-800-2484 2484
Pre Account Opening Toll-free: 0808 101 7384