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Difference Between NRE and NRO Demat Account

18 Oct 2024
By: BlinkX Research Team

Non-Resident Indians (NRIs) have access to two distinct types of bank accounts in India namely Non-Resident External (NRE) and Non-Resident Ordinary (NRO) accounts. While both are designed for NRIs, they serve different purposes and have unique features. Despite their similarities in being tailored for non-residents, these accounts are often misunderstood or confused with each other. To clarify the distinctions and help NRIs make informed decisions about their banking needs in India, it's crucial to understand the key differences between NRE VS NRO accounts. Thus, in this article, we will explore in detail what is the difference between NRE and NRO accounts. Investors must understand the difference between NRE and NRO Demat accounts and their importance.

Difference Between NRE VS NRO Account

To properly utilize the services and take advantage of the unique features, it is vital to understand NRE vs NRO account differences. The table below differentiates between NRE VS NRO Demat accounts:

Basis	NRE Accounts	NRO Accounts
Meaning	NRE Accounts also known as Non-Resident External Accounts, are designed for Non-Resident Indians (NRIs) to transfer and manage their earnings from abroad in India.	NROs also known as Non-Resident Ordinary Accounts are intended for NRIs to manage their income and investments sourced within India.
Taxability	Earnings are exempt from Indian taxes, including interest income.	Subject to Indian taxes, including income earned from interest.
Repatriability	Allows full repatriation of both the principal and interest amounts to the country of residence.	Interest earned is repatriable. However, the repatriation of the principal amount is restricted by specific limits.
Joint Account	Can be jointly held with another NRI.	Can be jointly held with another NRI or with a resident Indian.
Deposits and Withdrawals	Deposits must be made in foreign currency, while withdrawals are in Indian Rupees (INR).	Deposits can be made in both foreign and Indian currencies, but withdrawals in INR only.
Exchange Rate Risk	Exposed to fluctuations in exchange rates, which can affect the value of the deposits.	Not affected by exchange rate fluctuations as the account handles INR deposits and withdrawals.
Fund Transfer	Funds can be transferred from one NRE account to another NRE account, or from an NRE account to a resident or NRO account.	Funds can be transferred only to an NRO account or a resident account; transfers to NRE accounts are not permitted.
Currency Fluctuation	Sensitive to currency fluctuations due to the foreign currency component.	Not sensitive to currency fluctuations as the account primarily deals with INR.

Table of Content

Difference Between NRE VS NRO Account
What is an NRE Account?
What is an NRO Account?
What are the Charges for NRO Demat Accounts?
What are the Charges for NRE & NRO Demat Accounts?
Importance of NRE & NRO Demat Account

What is an NRE Account?

An NRE account holds foreign currency deposits in Indian Rupees and is secure. It is an INR-denominated account which allows for easy and faster conversion of foreign currency into INR at the time of deposit. The deposit to NRE must be initiated from sources outside India. Joint accounts are allowed, but all the holders of the joint account must be NRIs.

What is an NRO Account?

In India, an NRO account is utilized by Non-Resident Indians to channel their earnings from pensions, dividends, and rent, among others, and deal with and deposit money in Indian Rupees. One of the key features of the NRO account is its dual flexibility for receiving both foreign and Indian currency deposits. An NRO account can be opened jointly with another NRI or with an Indian resident; NRIs are allowed to transfer funds from NRE to NRO accounts.

What are the Charges for NRO Demat Accounts?

NRIs must pay three different kinds of NRO Demat account charges in general. They consist of:

Fees for creating an account
AMC (account maintenance charges)
GST (goods and services tax)

Banks and brokerages differ in the first two. The account opening fees range from ₹300 to ₹4,000, while the account maintenance charges (AMCs) range from ₹75 to ₹500. The GST is also charged at a rate of 18%.

What are the Charges for NRE & NRO Demat Accounts?

Investors have to pay the following charges for using an NRE or NRO Demat account.

Account opening charges
Account maintenance charge (AMC)
Transaction Charges while selling shares
Brokerage fees

The exact amount of charges usually varies from one stockbroker to another. However, most of them levy all these charges. In addition, GST charges may also be applicable in some cases.

Importance of NRE & NRO Demat Account

A Non-Resident Indian (NRI) is prohibited by RBI regulations from opening and operating a conventional resident Savings Account. In addition, any account must be changed into an NRI Account by the bank before obtaining NRI status. To conduct any financial transactions in India, an NRI must open a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) account. The NRI/PIO may choose to create either an NRE or NRO Account, or perhaps both, based on their transactional needs.

Conclusion
Knowing the difference between NRE vs NRO Demat accounts is essential for NRIs. NRE accounts let you keep and convert foreign currency into rupees, allowing you to repatriate your funds. It's good for managing overseas earnings and offers tax-free interest. In contrast, NRO accounts let you deposit both foreign and Indian currency. However, interest is taxed. These accounts are important for NRIs because they facilitate fund transfers, manage Indian income, eliminate currency risk, and let them operate with Indian residents. Additionally, if you are new to the financial markets and need help understanding them, you may check out the user-friendly BlinkX trading app, which provides online support.

FAQs of Difference Between NRE and NRO Account

Yes. An NRO account is an account that an NRI opens in India to manage his earnings there, as opposed to an NRE account, which is an account that an NRI opens in India to park his overseas profits.

If you want to hold or maintain overseas earnings in Indian currency, you should opt for NRE Accounts. The NRE account is also a good choice for liquid savings. To save your Indian earnings in Indian currency, you should opt for NRO Accounts.

Yes, you can have both an NRE and NRO account.

The NRE account is tax-free but the interest on the NRE account is tax free..

NRE accounts can only be opened by Indians or people who became non-residents under FEMA.

You can repatriate interest earned from an NRO account. However, repatriation of the principal amount is restricted by specific limits, unlike NRE accounts, which allow full repatriation.

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