Your full guide to NRI accounts: NRO and NRE accounts| North Loop Official Blog
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North Loop
15 Feb 2020

Your full guide to NRI accounts: NRO and NRE accounts

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Overview of NRE and NRO Accounts

Are you an Indian living abroad? Over 35 million Indians live abroad who are designated as NRIs (Non-Resident Indians). The Indian government classifies NRIs as Indians who spend more than 240 days a year abroad. Previously, this was 181 days but it was amended in the 2020 Budget.
The RBI (Reserve Bank of India) has created two types of bank accounts - NRE and NRO - to help Indians abroad with sending and depositing money. These accounts are especially critical if you want to park earnings from India (or abroad). You can use these accounts to support family in India, make investments, manage properties and more.
The Foreign Exchange and Management Act (FEMA) made it illegal for NRIs to have a savings account in India in their name. Therefore, all NRIs must convert their local Indian savings accounts into NRE/NRO account or else face heavy penalties. The three core benefits of having these accounts are: 1) sending earnings from abroad to India anytime 2) depositing earnings from India 3) earning tax-free interest income via NRE accounts.

What is an NRE account?

A Non-Resident Earnings (NRE) Account is an Indian account for NRIs to hold foreign funds. These accounts can be found in various forms - savings, current, fixed deposits etc. NRE accounts are Indian-rupee denominated accounts i.e. the foreign currency you deposit in them is converted into Indian rupees.
Use this account to deposit foreign earnings from your country of residence (e.g. USA), which can then be used to pay for Indian expenses such as rent, utilities etc.
NRE accounts also offer fixed deposits with tax-free interest earnings - enabling NRIs to earn a comfortable source of income without tax liabilities. You can use NRE accounts to invest in mutual funds, and can repatriate that income tax-free. Any funds deposited into NRE accounts can be remitted to foreign accounts very quickly and easily, tax-free.
You will also receive an international debit card that can be use anywhere 24/7.

Get a zero-balance, no-fee NRE/NRO account with North Loop in 5 minutes

What is an NRO account?

A Non-Resident Ordinary (NRO) Account is a bank account for Indians abroad. It can be in the form of savings, current, recurring or fixed-deposit. You can deposit foreign currency into this account, which will be automatically converted into Indian rupees. NRO accounts are a good way to deposit earnings from India e.g. if you have tenants paying you rent, ask them to send it to your NRO account.
NRO accounts are taxable as per Indian law. Therefore, NRIs use NRO accounts to deposit their Indian earnings, as well as foreign deposits. NRO accounts are usually recommended if you are not planning on repatriating the income/funds that are being deposited into that account.
NRO accounts can be jointly held by two NRIs or with one resident Indian as well.

Difference between NRO and NRE account

Both NRE and NRO accounts sound extremely similar at the surface. The main difference between NRE and NRO accounts is around their usage and taxation and repatriating the funds out of India. NRE accounts can only be opened with foreign currency, while NRO accounts can be opened using either Indian rupees or foreign currencies.
All funds that are repatriated from an NRE account are tax-free, whereas funds repatriated from an NRO account are taxable.
NRO Accounts are used when you don’t want to repatriate funds out of India - they are ideal for those who want to keep those specific funds within India. Since they can be held with a resident Indian, a good use case is for an NRI to use it to support a family member in India.
NRE vs NRONon-Resident Ordinary (NRO)Non-Resident External (NRE)
Open withIndian or foreign currencyForeign currency
Currency held inINRINR
Joint account of two or more NRIsYesYes
Joint account with an Indian residentYesNo
Repatriability of FundsRepatriable, after taxes and has certain conditionsFreely repatriable, tax-free
Interest RatesDetermined by bankDetermined by bank

Tax on NRE and NRO accounts

Income from interest on balances from the NRE account is exempt from income taxes. Income from balances in an NRO account is subject to Indian tax laws.
Please note that this information is given in an informational capacity and should not be taken as tax advice. Read all about NRO account tax here. Please speak to your tax advisor.

How to open an NRO/NRE account

Opening an NRO/NRE account is fairly cumbersome with most legacy Indian banks (North Loop makes it into a quick, 5 min process).

Can I open an NRO/ NRE account?

You can open an NRO/NRE account before you leave India, or while you are abroad. To qualify as an NRI, you must spend 240 days outside of India every year.

How to deposit money in NRO/ NRE account

NRIs can deposit money into their NRI accounts in the following ways:
  • Direct remit/transfer from your foreign bank account
  • Depositing physical foreign currency at your bank in India when or if you come to visit
  • Transferring funds from an existing NRE account in another bank in India
  • Other funds via bank transfer/cheque deposit from other individuals

The investment and monthly balance maintenance amount varies by bank - check what your bank requires online under their NRI services. North Loop offers free remittance to India, as well as zero-balance NRI accounts.

Penalty for not converting to NRO account

If you are leaving India and will become an NRI, make sure to inform your bank (or open an NRI account with North Loop).
If you don’t do this, and continue to use your Indian savings account as an NRI, you can face a penalty 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 in question. To avoid these penalties, we suggest converting your accounts at your local bank as soon as possible or opening an account with North Loop.

North Loop NRI Accounts

Sign up for early access to the world’s first zero-balance, no fee NRE/NRO accounts from North Loop here. You will get access to no fees, free remittance, industry-leading interest rates and more!

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended be advice. You must obtain professional advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax, investment or other professional advice from North Loop or its affiliates. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. All opinions expressed do not reflect the views of North Loop nor are endorsed by North Loop.