The main difference between NRE and NRO Account. As an NRI you have option to open two types of saving accounts to manage income earned in India and abroad - non-resident rupee accounts (NRE), and non resident ordinary rupee account (NRO).
There are many differences between NRE account and NRO account as listed in the following table which would help you choosing between the two:
| Basis of Difference | Non-resident Rupee Accounts(NRE) | Non Resident Ordinary Rupee Accounts(NRO) | |
|---|---|---|---|
| Type of Accounts | Can be opened as Savings Bank Deposit, Current Account, Term Deposit | Vs | Can be opened as Savings Bank Deposit, Current Account, Term Deposit |
| Purpose | Opened by NRIs who earn income abroad and would like to remit it back to India. | Vs | Opened by NRIs who earn income in India like income from rent from real estate properties in their names or pension etc. |
| Source of Fund | Foreign funds or repatriable rupee funds | Vs | Local rupee earnings. Existing domestic account of the residents can be converted to NRO account on their taking up employment/ business/immigration abroad. |
| Maintained in | Indian Rupee | Vs | Indian Rupee |
| Minimum Balance | Usually, Savings : Rs. 10,000, Term / Fixed Deposit: Rs. 50,000 | Vs | Usually, Savings : Rs. 10,000, Term / Fixed Deposit: Rs. 50,000 |
| Period | 1 Year to 5 Years | Vs | 1 Month to 10 Years |
| Rate of Interest | 7% to 9% depending on amount, period and bank | Vs | 7% to 9% depending on amount, period and bank |
| Joint Holding | Allowed. Joint holders can be NRIs residing in the same or different countries | Vs | Allowed. Joint holder can be resident Indians |
| Nomination | Allowed. Nominees can be Indian Residents/NRIs | Vs | Allowed. Nominees can be Indian Residents/NRIs |
| Repatriability | Principal as well as interest can be entirely repatriable | Vs | Principle is not repatriable but current income and interest earning net of taxes is repatriable. |
| Tax Exemptions | Interest is tax-free in India. However, it would attract tax in the country of residence of the account holder. | Vs | Interest is taxable. Tax is deducted at source(TDS) at 30% plus surcharge and cess |
| Currency Risk | Currency risk is there, there will be a loss in case rupee depreciates further at time of maturity and repatriation. | Vs | Currency risk is there, there will be a loss in case rupee depreciates further at time of maturity and repatriation. |
| Loan against this account | Permitted | Vs | Permitted |