Difference Between NRE, NRO and FCNR Bank Accounts

There are many types of NRI banks accounts available. But, here I will be explaining only the most widely used and offered by the leading banks in India. The following are the three types of NRI bank accounts offered by most of the bank across India:

• NRE (Non Resident (External) Rupee) Account: NRE is a term assigned to bank accounts available to NRI’s who currently reside outside India.
  • An NRE account can be a saving, current or a fixed term deposit account.
  • It is a Rupee dominated account which means funds in the NRE account are maintained in Indian Rupees. This means that the foreign currency is converted to Indian rupees at the prevailing foreign exchange rates when the money is deposited into the account.
  • The primary source of funds deposited into NRE accounts must be from your earnings abroad. In other words, you cannot deposit money from sources in India such as house rent or pensions in this account.
  • Both Principal and Interest can be repatriated(can be converted to any foreign currency) / transferred out of India. The conversion back to foreign currency is done at the prevailing forex rates.
  • Principle as well as Interest income earned on the money in a NRE account is non-taxable in India. Also there is no wealth tax. This tax exemptions is available only for an NRE Account held by an individual and not for those maintained by OCBs (Overseas Company Bodies)
  • interest rates on NRE Savings deposits are the same as the rates applicable to domestic savings deposits.
  • You can only have other NRIs as joint account holders on NRE accounts. Resident Indians cannot be joint account holders in NRE accounts with NRIs.
  • You can not deposit Local rupee fund i.e Indian Currency in to this account.
  • A resident power of attorney holder can not open an NRE account on behalf of an NRI. But the resident power of attorney holder can make local, rupee payments on behalf of the NRI.
  • Nomination is allowed for NRE accounts.
  

• NRO (Non Resident Ordinary) Account : NRO is a term assigned to bank accounts available to NRI’s who currently reside outside India
  • An NRO account can be a saving, current or a fixed term deposit account.
  • Regular bank accounts of a person, who becomes an NRI, also get converted into NRO accounts.
  • It is a Rupee dominated account which means funds in the NRO account are maintained in Indian Rupees. This means that the foreign currency is converted to Indian rupees at the prevailing foreign exchange rates when the money is deposited into the account.
  • The source of funds deposited into NRO accounts can be from India or abroad. An NRO account can hold income earned in India (such as dividends, pension or rental income).
  • Funds can not be transferred from an NRO account to an NRE account.
  • An NRO account can be held jointly with another NRI or with a resident Indian.
  • Principle amount cannot be repatriated outside India in foreign exchange, without prior permission of the Reserve Bank of India. Only current earnings are repatriable.
  • The interest earned on deposits in an NRO account is taxable in the hands of the NRI as per the applicable income tax slab rates.
  • Interest rates on NRO Savings deposits are the same as the rates applicable to domestic savings deposits.
  • A resident power of attorney holder can not open an NRO account on behalf of an NRI. But the resident power of attorney holder can make local, rupee payments on behalf of the NRI.
  • Nomination is allowed for NRO accounts.
• FCNR (Foreign Currency Non Resident) Account : The term FCNR refers to fixed-term deposit accounts available to NRIs and PIOs. FCNR accounts have to be opened and maintained in the foreign currency itself. FCNR accounts can be opened in five different currencies viz., US dollar, Pound Sterling, Euro, Jap Yen, Canadian Dollar & Australian Dollar. The source of funds deposited into FCNR accounts have to be from sources abroad. They can also be from your other NRE or FCNR accounts. The principal amount and the interest are fully repatriable. Interest income earned on the money in a FCNR account is non-taxable in India.

Accounts	NRE	NRO
Full Form	Non Resident (External) Rupee	Non Resident Ordinary
Currency	Indian Rupees	Indian Rupees
Account Type	Savings, Current or Fixed Deposit	Savings, Current or Fixed Deposit
Who can open?	NRI Only	NRI Or Resident before becoming an NRI
Repatriation Allowed?	Yes	With prior permission of the Reserve Bank of India
source of funds	Funds remitted from abroad, Funds from another NRE / FCNR account	Funds received from within India and abroad
Fund transfer to another account	Funds can be transferred from an NRE account to an NRO / NRE / Resident account	Funds can be transferred from an NRO account to an NRO / Resident account
Joint account With NRI	Yes	Yes
Joint account with resident	No	Yes
Income Tax	Tax free	Taxed as per applicable slab rate
Can power of attorney holder open the account?	No	No
Can power of attorney holder operate the account?	Yes, can make local rupee payments	Yes, can make local rupee payments
Is nomination allowed?	Yes	Yes
Status of the account when NRI returns to India	Converted to resident account	Converted to resident account
ATM Card	International Debit plus ATM card	ATM Card
Best Suited For	To park overseas savings remitted to India by converting to INR	To park Indian earnings like rent, Indian salary, dividend, etc
Local Rupee Funds	Can Not Deposit	Can Deposit

If the NRI holding the NRE account returns to India and becomes a resident of India, the NRE and NRO accounts get converted into a regular resident account.
Note : Only those banks holding an Authorized Dealers’ license or banks specially authorized in this regard by the Reserve Bank of India (RBI) are permitted to open these accounts on behalf of NRIs