Whenever you see the alphabets NR preceded by any other alphabet that generally means it has something to do with a Non-Residential Indian. Often, we see the abbreviations, NRI, NRE, NRO, etc which are all NRI account with different features and functions. These accounts have been brought into existence in order to simplify things for those NRIs who wish to make savings or investment in India. Let us see how;

WHAT IS AN NRO ACCOUNT?
NRO stands for Non-Resident Ordinary Rupee is current or savings account for NRIs held in India to manage the money earned in India. This account helps them accumulate money by letting them deposit it in the NRO account. The currency deposited in the NRO account gets automatically converted to INR.
Opening an NRO account can be done jointly with a resident of India in which case both of you get a debit card for the same account. The interest earned on this account holdings is subject to TDS.

WHAT IS AN NRE ACCOUNT?
NRE stands for Non-Resident Rupee account which is an account loaded with security features as it has denomination in Indian Rupee. The holdings in this account can exist in the form of fixed deposit, savings, recurring deposit or current. Only foreign currency can be deposited in the NRE account which at the time of deposit gets converted to INR. Repatriation is allowed all the time. Moreover, there is no tax on the interest earnings of this account.
Also, there are no charges on money transfer from the country of residence to India. One of the biggest advantages of NRE account is that it eases the mutual fund investments if you link your NRE account to investment account.

NEED FOR NRE & NRO ACCOUNTS
It is considered illegal for a non-resident Indian to have a savings account in his/her own name as per FEMA (Foreign Exchange Management Act) guidelines. Hence if an NRI wishes to keep savings account in India then it is mandatory for them to open an NRE or NRO account to repatriate the money earned in the resident country. Failing to do so, NRI can be charged with heavy penalties and fines.
This is a multi-benefit operation which allows NRIs to both hold a savings account in their home country India and own assets as well.

DIFFERENCE BETWEEN NRE AND NRO ACCOUNT
There are several points of difference between the two accounts;
1. REPATRIATION
NRE account allows free repatriation without any upper limit in a given financial year. This rule is applicable for both interest and principal amount. In the case of NRO account, the maximum repatriation limit is 1 million US Dollars which includes taxes as well. Also, if you wish to repatriate money from your NRO account, you would need a certificate from a Chartered accountant.

2. DEPOSIT OF FUNDS GENERATED IN INDIA
If you are an NRI or PIO or OCI and happen to earn funds in the form of dividends, rent, salary, etc. in India, this amount can only be deposited in NRO account. NRE accounts do not entertain income generated in India.

3. TAX
NRE account is a tax-free account where income tax, wealth tax or gift tax do not hold good whereas in case of NRO account, the tax is applicable as per bracket and also wealth and gift tax are applicable as well.

4. JOINT ACCOUNT HOLDING
Only two NRIs can have a joint operation NRE account whereas in case if NRO account an NRI can open it jointly with an NRI or a resident Indian as well as mentioned in the Companies Act 1956, Section 6.

5. FLOW OF FUNDS
With NRE account you can repatriate money in any currency outside India. This is not allowed under the NRO account.

SIMILARITIES BETWEEN NRE AND NRO ACCOUNT
Both the accounts can be opened as current or savings accounts. They are Indian Rupee or Indian Currency accounts. There is an AMB condition to both the accounts which is Rs. 75000, AMB is the average monthly balance.

Depending upon the kind of earnings you have as an NRI and the location of those earnings, you can decide which account to choose. They offer you investment freedom which can be made from outside India. Select the best funds that grow wealth, we at Piggy (www.piggy.co.in) are happy to assist in this.

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