Difference Between NRE and NRO Account| Meaning, Full Form and Benefits

You must often hear your NRI relatives or friends complaining about the challenges of managing finances across borders. It is hard, especially when it comes to investing in their home country while living abroad. Did you know that NRE and NRO accounts are necessary for NRIs to invest in the Indian market and maintain their finances?

NRE and NRO accounts are specialised accounts for Non-Resident Indians (NRIs).

Now, what are these NRO and NRE accounts, and what is the difference between NRE and NRO account?

Let us understand it today!

What is NRE Account

NRE full form is Non-Resident External.

An NRE account is an ideal option for depositing your foreign income. The funds in this account are freely repatriable. This means that you can transfer them back to your home country without restrictions.  

Income earned on the NRE accounts is tax-exempt.

As per SEBI, if you are an NRI willing to invest in the Indian securities market, you must have the following NRE accounts:

• NRE Savings Bank Account
• NRE PIS Bank Account
• NRE Demat Account
• NRE Trading Account

What is NRO Account

NRO full form is Non-Resident Ordinary.

An NRO account is for any person residing outside India. Its purpose is to conduct legitimate transactions in Indian Rupees. Individuals or entities from Pakistan or Bangladesh need approval from the Reserve Bank of India to open this account.

With an NRO account, you can keep rent, dividends, or pension. The Funds in an NRO account cannot be freely repatriated abroad, except for current income. Also, the balances in NRO accounts are subject to Indian taxes.

As per SEBI, if you are an NRI willing to invest in the Indian securities market, you must have the following NRO accounts:

• NRO Savings Bank Account
• NRO Demat Account
• NRO Trading Account

How do you decide between NRE and NRO accounts to determine which NRI account in India suits you best?

NRO vs NRE- Let us understand the basic difference between NRE and NRO accounts.

Difference Between NRE and NRO Accounts

NRO vs NRE| This table summarises the key difference between NRE and NRO accounts in India.

Basis	NRE Account	NRO Account
Full Form	Non- Resident External	Non- Resident Ordinary
Who Can Open an Account	NRIs and PIOs (A Person of Indian Origin)	Any person resident outside India
Joint account	Jointly in the names of two or more NRIs/PIOs	Jointly with residents on a ‘former or survivor’ basis/ May be held jointly with residents on a ‘former or survivor’ basis.
Currency	Indian Rupees	Indian Rupees
Type of Account	Savings, Current, Recurring, Fixed Deposit	Savings, Current, Recurring, Fixed Deposit
Period for fixed deposits	1 to 3 years (may vary)	As applicable to resident accounts
Permissible Credits	The inward remittance, current income like rent, dividend, pension, interest, etc	Inward remittances, legitimate dues in India, transfers from other NRO accounts
Permissible Debits	Local disbursements, remittance outside India	Local payments, transfers to other NRO accounts, remittance abroad up to USD 1 million per year
Repatriability	Fully repatriable	Up to USD 1 million per year (along with other eligible assets)
Taxability	Exempt from income tax and wealth tax	Taxable
Loans outside India	Loans can be granted outside India against security of NRE/FCNR(B) deposits	Not Permitted

What is Foreign Currency (Non-Resident) Account (FCNR)

This is a term deposit account where you can hold funds in any permitted currency, i.e., a freely convertible foreign currency. The FCNR accounts offer protection against exchange rate fluctuations and are repatriable.

Things to Keep in Mind While Opening an NRI Account

When opening an NRI account, remember these key points:

1. You must make the right choice between an NRE and an NRO account based on your repatriation needs.
2. Be aware of the tax liabilities and exemptions for the interest earned on these accounts.
3. Keep all your documents, such as passport, visa, address proof, and photographs, ready for a smooth account opening process.

How do You Choose a Broker for NRI Trading and Demat Account?

Shoonya is one of the best trading platforms in India. It offers zero brokerage trading and a free Demat account.

Here’s how you can open an NRI account with Shoonya.

NRI Account on Shoonya

To open an NRI account, you can contact Shoonya through Live Chat, email ([email protected]), or by calling Sales team at +91 9098001001. 

Upon receiving the request, Shoonya will assist in the process.

Here’s a step-by-step process for setting up an NRI trading demat account:

1. Opening a Bank Account

First, you must have an NRO bank account.

2. Opening Demat and Trading Accounts

Once you have your NRO bank account, you can proceed to open a Demat and trading account. 

Note-  NRIs can trade in Equity and FNO segments by opening Demat and trading accounts through NRO non-PIS accounts.

You’ll need to submit the following documents:

1. PAN Card
2. Passport (Indian or Foreign)

In case of a Foreign Passport, you must include a copy of the PIO/OCI Card as applicable for PIO/OCI.

3. Proof of Address (Indian & Overseas)

You can provide any one of the following documents – 

• Passport
• Voter ID Card
• Driving License
• Bank Passbook/Bank Statement
• Utility Bills
• Notarised copy of rent agreement
• Identity card/document with address issued by Central/State Government, Statutory/Regulatory Authorities.

4. Bank Proof

NRO cancelled cheque or 1-month bank statement.

5. Income Proof for derivatives segment.
6. Copy of VISA.

Note: All documents such as PAN card, passport, and foreign/Indian address proof must be self-attested and notarized by the Indian embassy or another competent authority. 

The attesting authority should affix a “verified with original” stamp, along with their name, designation, signature, and the date on the documents.

Key Considerations for NRIs Investing in India

Here are the key points to remember for NRIs investing in India:

• NRI stock holdings in any Indian-listed company cannot exceed 10%.
• NRIs cannot trade intraday in equity markets.
• NRIs must have 100% funds available when buying or selling stocks; no leverage is permitted.
• NRIs can have accounts with only one bank at a time. They are also limited to one PIS account each for repatriable and non-repatriable shares.
• NRIs cannot trade in currency and commodities segments.
• Certain scripts are restricted for trading by NRIs as per RBI guidelines.

FAQs|NRO vs NRE

Source- https://www.rbi.org.in

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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.