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Difference between NRE, NRO and FCNR


Non- resident Indian is a person who is a native of India or an individual of Indian origin and not a native of India. An NRI account is an account that a non-resident Indian (NRI) or a person of Indian origin (PIO) can unlock with a financial institution like a bank.  A non-resident Indian (“NRI”) can open different accounts in India to manage their income earned outside India and income earned in India. The different types of account that NRI can open are NRE, NRO and FCNR account. The brief features of same are as follows:

Non-resident external (NRE) account
A non-resident external account is a saving account in which an individual can deposit an amount in foreign currency and freely repatriate money back into the currency of residence. All funds deposited are maintained in the Indian rupee, i.e., these are INR based accounts. When you put foreign currency into this account, the current exchange rate is applied by the receiving bank, and Indian rupees equal to the exchange rate are placed in your account. An NRE account can be opened independently or cooperatively. However, a joint account can be unlocked only with one more NRI.

Key features:

  • Money is tax-free and repatriable.
  • Facilitates transfer of foreign currency to India to maintain INR balance.
  • You can up to 4.35% interest on your NRE account.
  • NRE account has a foreign exchange prospect due to currency variation.
  • Not taxable in India.

Non-resident ordinary (NRO) account
An ordinary non-resident account is a saving account in which an individual can deposit their earnings from India. For example, you can deposit Indian payments from dividends, pension, rentals, or other income into an NRO account. An NRO account facilitates the money transfer abroad. In this account, one can retain money in Indian or foreign currency.

Key features:

  • Enables managing income earned in India from various sources.
  • When you deposit foreign currency into NRO, it gets converted into INR as the applicable exchange rate.
  • Withdrawals are possible in only INR.
  • You can re-settle up to USD 1 million every financial year from this account.
  • NRO account has no foreign exchange risk.

Foreign currency non-resident (FCNR) accounts
FCNR account is an account used to deposit foreign currency earned overseas in a term deposit. It allows an NRI to deposit their money in the desired currency. Also, the deposits made should be the earnings from the NRIs country of residence. One can also shift funds from an NRE account to an FCNR account while opening. The interest rate on FCNR accounts varies with the currency and tenure. Also, NRO accounts can be utilized for investing in India. For example, In mutual funds, shares etc.

Key features:

  • An FCNR account holder can maintain their deposits in nine currencies permitted by RBI: USD, GBP, AUD, SGD, CAD, CHF, HKD, EUR, and JPY.
  • Tenure of the deposit ranges from 1-5 years.
  • The amount deposited and interest earned on the same are fully repatriable.
  • Allows automatic renewal on deposit on maturity.
  • Not taxable in India.

Opening NRE, NRO and FCNR accounts online
As an NRI, you can open your NRE, NRO and FCNR accounts online.
You can complete the account opening form accessible on the bank’s website and give examined copies of the essential papers as indicated on the form. In case of online account opening, the documents should be duly attested by the embassy of the country you are residing in. You will also be needed to complete in-person verification (IPV) with your bank.

Advantages of opening an NRI account in India
Following are the benefits of opening an NRI account in India:

  • Investments in India
  • Taxation
  • Repatriation
  • Low minimum balance
  • Deposits in more than one currency

Drawbacks of opening an NRI account in India
Following are the disadvantages of opening an NRI account in India:

  • Low liquidity
  • Foreign exchange rate risk

Documents required for opening an NRI account
Following are the documents required for unlocking an NRI account in India:

  • Valid passport
  • Pan card or form 60 in the absence of PAN card
  • Proof of NRI status-valid work visa, valid work permit and valid overseas resident card
  • Passport-sized photographs
  • Initial payment cheque or draft
  • Address proof

A duplicate of all the above papers have to be attested by any of the following:

  • Authorized personnel of overseas branches of commercial banks registered in India
  • Authorized personnel of banks with whom Indian banks have a relationship
  • Overseas notary public
  • Court magistrate
  • Judge
  • Indian embassy where the NRI desires

All three accounts provide uncomplicated and systematic ways of managing your income from various sources and permit you to transfer funds between India and your country of residence, so go ahead and choose an account that suits you best.

At AJSH, we assist our clients in dealing with various income tax compliances, including income tax assessments, TDS returns, ITR filings, tax advisory and other related services by providing them adequate support and guidance from our end. If you have any questions our wish to know more about NRE, NRO and FCNR accounts, kindly contact us.


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