NRE and NRO accounts are two types of bank accounts available for Non-Resident Indians (NRIs) to manage their finances in India. The main differences between the two accounts are:
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Purpose: An NRE account is used to park foreign earnings in India in Indian rupees, while an NRO account is used to manage income earned in India by an NRI in Indian rupees, such as rent, dividend, pension, interest, etc. .
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Currency: An NRE account can be used to deposit and withdraw funds in foreign currency, while an NRO account can be used to deposit and withdraw funds in both foreign and Indian currency.
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Taxation: The principal amount and interest earned on an NRE account are exempt from tax, while the interest earned on an NRO account is taxable at 30% according to the Income Tax Act 1961. .
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Repatriation: Funds from both NRE and NRO accounts can be freely repatriated, but there are some restrictions on repatriation from NRO accounts. For NRE accounts, both the principal amount and interest earned are freely and completely transferable, while for NRO accounts, funds can be repatriated post-payment of applicable taxes with a limit of USD 1 million in a financial year.
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Joint account holding: An NRE account can be held jointly by two NRIs or an NRI and a resident Indian citizen, while an NRO account can be opened by an NRI along with an Indian citizen or other NRIs.
In summary, NRIs can choose between NRE and NRO accounts based on their unique needs and income sources. If their total income includes income earned in India and they want to manage it within the country, they can opt for an NRO account. On the other hand, if they want to transfer their foreign earnings to India in Indian rupees, they can ope...
