An NRI (Non-Resident Indian) with earnings both abroad and/or in India often faces difficulties in managing his/her finances. They also find it difficult to track bank accounts in the different country, and also when trying to repatriate money to their home account.
 

Why do we need NRE and NRO accounts?
As per the FEMA (Foreign Exchange Management Act, 1999) guidelines, it is illegal for NRI’s to have saving accounts in their name in India. It is mandatory to convert all the present savings (money earned abroad) to an NRE/NRO. Therefore, continuing to use the savings account in the home country can lead to complications like hefty penalties. Opening an NRE and/or NRO account is, hence, a viable option for Non Resident Indians. It can help NRIs in two ways. Firstly, they can send the money they earned to India anytime they want. Two, they can also retain their income from India (via any assets) in the home country itself.

What is an NRE Account?
Widely known as Non-Resident External Account (NRE). It is an Indian Rupee denominated account, which is freely repatriable. This form of NRI account can be in the form of savings, current, recurring or fixed deposits. The income is deemed to be earned outside India. Indian Rupees cannot be deposited into this account, only foreign currency can be deposited which will be converted into Indian Rupee at the time of deposit. The interest earned on the balances at the end of quarter is free from any income tax. However, the NRI can send his remittances from abroad into this type of account. The bank pays interest on the balance at their own determined rates.

What is an NRO Account?
An NRO (Non-Resident Ordinary) account is a savings or current account held in India that helps NRIs manage income earned in India such as rent, dividends, or pension from abroad. The account holder can deposit and manage accumulated rupee funds conveniently through an NRO account. Foreign currency deposited into the NRO account is converted into Indian Rupees. Any NRI can open an NRO account. NRIs may also convert their existing resident savings account into an NRO account when their status changes from resident to non-resident. A minimum amount of Rs.10,000 must be maintained in an NRO account on a daily basis. Any repatriation done through this account should be reported to RBI.
 

Difference between NRI and NRO Accounts