Here is a comparison of NRI (Non-Resident Indian) and NRO (Non-Resident Ordinary) bank accounts in India in a tabular format:
| Parameter | NRI Bank Account (NRE – Non-Resident External) | NRO Bank Account (Non-Resident Ordinary) |
|---|---|---|
| Purpose | To park overseas earnings in India in Indian Rupees (INR). | To manage income earned in India (e.g., rent, dividends). |
| Currency | Can be maintained in Indian Rupees (INR), funds are freely repatriable. | Can be maintained in Indian Rupees (INR). |
| Source of Funds | Foreign income or money earned abroad. | Income earned in India (rent, pension, interest, dividends). |
| Repatriation of Funds | Freely repatriable (Principal and interest) without restrictions. | Principal is non-repatriable (except up to $1 million per financial year). Interest is repatriable. |
| Taxation | Interest earned is tax-free in India. | Interest earned is subject to income tax, TDS (Tax Deducted at Source) applies. |
| Joint Holding | Can be held jointly with another NRI. | Can be held jointly with another NRI or resident Indian. |
| Account Type | Savings, Current, Fixed Deposit, or Recurring Deposit account. | Savings, Current, Fixed Deposit, or Recurring Deposit account. |
| Interest Rates | Generally lower than NRO accounts. | Generally higher than NRE accounts. |
| Transfer of Funds | Can transfer funds to another NRE or FCNR (Foreign Currency Non-Resident) account. | Can transfer funds only to another NRO account. |
| Currency Risk | Subject to currency conversion and exchange rate risks. | No currency conversion involved as it is in INR. |
| Power of Attorney (POA) | Can be granted to a resident Indian for operating the account. | Can be granted to a resident Indian for operating the account. |
| Withdrawals | Withdrawals can only be in Indian Rupees (INR). | Withdrawals can only be in Indian Rupees (INR). |
The main difference between NRI (Non-Resident Indian) and NRO (Non-Resident Ordinary) bank accounts lies in their purpose and the nature of funds they are designed to handle. These accounts are meant for Indians living abroad, helping them manage their finances in India effectively. Here’s a detailed comparison:
1. Purpose:
- NRI Account (NRE Account): This is primarily for depositing income earned outside India. It is ideal for NRIs who want to maintain savings in India in Indian Rupees but funded by their earnings abroad.
- NRO Account: This is for managing income earned from Indian sources, such as rent, dividends, or pension from India. It is used by NRIs to manage their earnings within India.
2. Currency:
- NRI Account: The funds in an NRE account are maintained in Indian Rupees but the source of the funds is usually foreign currency, which is converted to INR.
- NRO Account: This account also holds funds in Indian Rupees. The sources are typically Indian and the account handles income earned or sourced within India.
3. Repatriability (Ease of moving funds abroad):
- NRI Account: Funds in an NRE account (both the principal and the interest earned) are freely repatriable, meaning they can be transferred to the account holder’s country of residence without much restriction.
- NRO Account: The repatriation of funds from an NRO account is restricted. The principal amount has limits on repatriation, and while the interest can be repatriated freely, it requires adherence to specific procedural norms set by the RBI (Reserve Bank of India).
4. Taxation:
- NRI Account: Interest earned on NRE account balances is tax-free in India.
- NRO Account: Interest earned on NRO accounts is subject to Indian Income Tax, which can be as high as 30% plus applicable surcharge and cess.
5. Joint Holding:
- NRI Account: Can be held jointly with another NRI but not with a resident Indian unless it is on a ‘former or survivor’ basis.
- NRO Account: Can be held jointly with another NRI or a resident Indian.
6. Deposits and Withdrawals:
- NRI Account: Can only be funded by remittances from abroad, foreign currency during a visit to India, or a transfer from another NRE/FCNR account.
- NRO Account: Can be funded by remittances, other NRO accounts, or income from Indian sources.
