Many Indians living abroad need a bank account to manage their income overseas, and they often feel confused about whether to choose an NRE account or an NRO account. Read on to know more about both types to make an informed choice.
Moving to a new country can sound exciting and overwhelming at the same time. Not only must you move your things, but also you may have to start from scratch. This may include finding a new job, a new home, and even something as simple as opening a new bank account. Many Indians who move abroad in search of better jobs or business opportunities maintain a designated NRI bank account to manage their income.
If you are deliberating whether to open an NRE account or an NRO account, you must be aware of the features to make the right choice.
If you are working overseas and earn an income, opening a Non-resident External account is ideal. It allows you to convert your earnings in foreign currency and deposit it in Indian Rupees so that your family members in India can withdraw the same.
You can open an NRE account as a savings account, current account, or term-deposit account. Another striking benefit of an NRE account is that you can repatriate the balance in your account (the principal amount and the accrued interest) to the FCNR account without incurring any charges. Also, the interest earned from your deposits is exempted from tax.
One of the important features is that the deposited amount must be earned in a foreign country. Today, most banks in India offer an international debit card to NRE account holders, which means you can operate your account and withdraw money 24×7. You can also link your NRE account to your investment account and transfer the funds to your investments.
Just like the NRE account, the NRO account is also a Rupee-dominated account. It is an ideal choice of account to manage your earnings in India. This income could be through rent from property, dividends from investments, business operations in India, etc. NRO account allows you to deposit the earnings in India in Indian currency.
One of the distinguishing features of this NRI account is that, unlike the NRO account, your deposits are taxable according to the Indian Income Tax Act. However, you can lower the tax rate by submitting a tax residency certificate issued by the authorities in the country of your current residence.
You can open an NRO account as a joint account with either a non-resident Indian or a resident Indian. However, the person must be a close relative only. The minimum account balance requirement in your account and the minimum investment term varies from bank to bank.
You can also appoint a nominee who will be entitled to receive the funds in the event of your demise.
NRE Account or NRO Account – What to Choose?
If you have your main source of income in India, it is best to open an NRO account as it allows you to keep your funds safe and secure. If your source of income is from your employment or business abroad, you can opt for an NRE account. It allows you to remit the money in INR and gives you liquidity. Also, it allows you to easily move the funds between India and your country of residence.
So, depending on your specific requirements, you can make the right choice. You can also open both an NRE and NRO account. You can transfer your funds between the account provided you submit the necessary documents to the bank. Lastly, if you are sure that you don’t need to access the funds anytime soon, you can open an NRE fixed deposit account and earn valuable returns.