Difference between NRE, NRO and FCNR accounts explained
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Key Takeaways: NRIs have many bank account options to choose from depending on their financial objectives. Read on to know more about the different types of accounts available, their features and benefits so that you can make the right choice.
As an NRI, you may be earning a dual income – one in your country of residence in foreign currency and the other from your Indian investments in INR. You may frequently want to transfer the money you have earned abroad back to India and vice versa or you may need access to money in a bank during your travels to India.
To manage these transactions, you can choose between an NRE, NRO or FCNR account. Let’s look at each of them in detail.
Non-Resident External (NRE) account
A Non-Resident External (NRE) account is a savings account in which you can deposit foreign currency earnings and freely repatriate monies held in the account back to your country of residence.
NRE accounts are INR denominated accounts which means all the funds you deposit are maintained in Indian rupee. When you deposit foreign currency into this account, the current exchange rate is applied by the receiving bank and Indian rupees matching the exchange rate are deposited in your account.
Key features of the NRE account
- The money you deposit in this account is completely repatriable and tax-free
- The account facilitates the transfer of foreign currency to India allowing you to maintain an INR balance in your Indian bank account
- You can earn up to 3% p.a. interest rate on your savings account and up to 4.35% p.a. interest rate on your NRE deposits*
Non-Resident Ordinary (NRO) account
A Non-Resident Ordinary (NRO) account is a savings account that is useful if you have earnings in India. You can deposit Indian earnings – from dividends, equity returns, pension, rentals, or any other income – into an NRO account.
Similar to an NRE account, NRO Account is maintained in INR too.
Key features of the NRO account
- The NRO account enables you to manage your income earned in India from various sources
- When you deposit foreign currency in the NRO account, it gets converted to INR as per the exchange rate applicable
- Withdrawals can only be made in INR
- You can earn up to 3% p.a. interest rate on your savings account and up to 5.5% p.a. interest rate on your NRO deposits*
- You can repatriate up to USD 1 million every financial year from this account.
Foreign Currency Non-Resident (FCNR) accounts
FCNR is an account that allows you to save money earned overseas in a foreign currency in a term deposit.
Key features of the FCNR account
- As an FCNR account holder, you can maintain your deposit in various currencies including USD, GBP, AUD, CAD, SGD & HKD
- The tenure of these deposits can range between 1 year and 5 years
- The amount you deposit and the interest earned are fully repatriable
- FCNR account allows automatic renewal of deposit on maturity
- FCNR deposits are not taxable in India
Opening NRE, NRO and FCNR accounts online
As an NRI, you can open your NRE, NRO and FCNR account online. You can fill the account opening form available on the bank’s website and submit scanned copies of the necessary documents as mentioned 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 required to complete an in-person verification (IPV) with your bank.
Final Note: All three accounts offer easy and efficient ways of managing your income from diverse sources and allow you to transfer funds between India and your country of residence so go ahead and choose an account that suits you best.
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*Please note that the interest rates are applicable as on April 2020 and are subject to change
Disclaimer: This article has been shared purely from an information perspective and we recommend you conduct extensive research before proceeding.