Difference Between NRO Account and NRE Account
Difference Between NRO Account and NRE Account : Eligibility
Eligibility for Non-Resident (External) Rupee Account Scheme – NRE Account :
– Non-resident Indians (NRIs) and Person of Indian Origin (PIOs) are permitted to open and maintain these accounts with authorised dealers and with banks (including cooperative banks) authorised by the Reserve Bank to maintain such accounts.
The account should be opened by the non-resident account holder himself and not by the holder of the power of attorney in India.
Eligibility for Non-Resident Ordinary Rupee Account Scheme -NRO Account :
(a) Any person resident outside India may open NRO account with an authorised dealer or an authorised bank for the purpose of putting through bona fide transactions in rupees not involving any violation of the provisions of the Act, rules and regulations made thereunder.
(b) The operations on the accounts should not result in the account holder making available foreign exchange to any person resident in India against reimbursement in rupees or in any other manner. (c) At the time of opening of the account, the account holder should furnish an undertaking to the authorised dealer/ authorised bank with whom the account is maintained that in cases of debits to the account for the purpose of investment in India and credits representing sale proceeds of investments, he will ensure that such investments/ disinvestments will be in accordance with the regulations made by Reserve Bank in this regard.
A. Opening of accounts by individuals/ entities of Pakistan nationality/ ownership requires approval of Reserve Bank.
B. Opening of accounts by entities of Bangladesh ownership requires approval of Reserve Bank. C. Opening of accounts by individual/s of Bangladesh nationality may be allowed by authorised dealer or authorised bank, subject to satisfying itself that the individual/s hold a valid visa and valid residential permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned;
D. Post Offices in India may maintain savings bank accounts in the names of persons resident outside India and allow operations on these accounts subject to the same terms and conditions as are applicable to NRO accounts maintained with an authorised dealer/ authorised bank.
Difference Between NRO Account and NRE Account : Types of accounts
Non-Resident (External) Rupee Account Scheme – NRE Account
The accounts may be maintained in any form, e.g. savings, current, recurring or fixed deposit account etc.
Non-Resident Ordinary Rupee Account Scheme -NRO Account
Difference Between NRO Account and NRE Account :Permitted Credits
a) Proceeds of remittances to India in any permitted currency.
b) Proceeds of personal cheques drawn by the account holder on his foreign currency account and of travellers cheques, bank drafts payable in any permitted currency including instruments expressed in Indian rupees for which reimbursement will be received in foreign currency, deposited by the account holder in person during his temporary visit to India, provided the authorised dealer/ bank is satisfied that the account holder is still resident outside India, the travellers’ cheques/ drafts are standing/ endorsed in the name of the account holder and in the case of travellers’ cheques, they were issued outside India.
c) Proceeds of foreign currency/ bank notes tendered by account holder during his temporary visit to India, provided (i) the amount was declared on a Currency Declaration Form (CDF), where applicable, and (ii) the notes are tendered to the authorised dealer in person by the account holder himself and the authorised dealer is satisfied that account holder is a person resident outside India.
d) Transfers from other NRE/ FCNR (B) accounts.
e) Interest accruing on the funds held in the account.
f) Current income in India due to the account holder, subject to payment of applicable taxes in India
g) Maturity or sale proceeds of any permissible investment in India which was originally made by debit to the account holder’s NRE/ FCNR (B) account or out of remittances received from outside India through banking channels.
Provided that the investment was made in accordance with the foreign exchange regulations in force at the time of making such investment.
h) Refund of share/ debenture subscriptions to new issues of Indian companies or portion thereof, if the amount of subscription was paid from the same account or from other NRE/ FCNR (B) account of the account holder or by remittance from outside India through banking channels.
i) Refund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings / deals for purchase of residential/ commercial property, together with interest, if any (net of income tax payable thereon), provided the original payment was made out of NRE/ FCNR(B) account of the account holder or remittance from outside India through banking channels and the authorised dealer is satisfied about the genuineness of the transaction.
j) Any other credit if covered under general or special permission granted by Reserve Bank.
Permitted Credits under Non-Resident Ordinary Rupee Account Scheme -NRO Account
(i) Proceeds of remittances received in any permitted currency from outside India through banking channels or any permitted currency tendered by the account-holder during his temporary visit to India or transfers from rupee accounts of non-resident banks.
(ii) Legitimate dues in India of the account holder.
(iii) Transfers from other NRO accounts.
(iv) Any amount received by the account holder in accordance with the rules or regulations made under the Act.
Difference Between NRO Account and NRE Account :Permitted Debits
Permitted Debits under Non-Resident (External) Rupee Account Scheme – NRE Account :
a) Local disbursements.
b) Remittances outside India.
c) Transfer to NRE/ FCNR (B) accounts of the account holder or any other person eligible to maintain such account.
d) Investment in shares/ securities/ commercial paper of an Indian company or for purchase of immovable property in India provided such investment/ purchase is covered by the regulations made, or the general/ special permission granted by the Reserve Bank.
e) Any other transaction if covered under general or special permission granted by the Reserve Bank.
Permitted Debits under Non-Resident Ordinary Rupee Account Scheme -NRO Account
(i) All local payments in rupees including payments for investments subject to compliance with the relevant regulations made by the Reserve Bank.
(ii) Remittance outside India of current income in India of the account holder net of applicable taxes.
(iii) Transfers to other NRO accounts.
(iv) Settlement of charges on International Credit Cards issued by authorised dealer banks in India to NRIs or PIOs, subject to the limits for repatriation of balances held in NRO accounts specified in regulation 4(2) of Foreign Exchange Management (Remittance of Assets) Regulations, 2016
Difference Between NRO Account and NRE Account :Remittance of funds
Remittance of funds under Non-Resident (External) Rupee Account Scheme – NRE Account
Authorised dealers/ authorised banks may allow remittance of funds lying in the NRE account of the deceased account holder to his non-resident nominee.
Remittance of funds under Non-Resident Ordinary Rupee Account Scheme -NRO Account
Balances in NRO accounts are not eligible for remittance outside India without the general or specific approval of Reserve Bank. Funds received by way of remittances from outside India in foreign exchange which have not lost their identity as remittable funds will only be considered by Reserve Bank for remittance outside India. Where an account (current/ savings) is opened by a foreign tourist visiting India, with funds remitted from outside India in a specified manner or by sale of foreign exchange brought by him to India, authorised dealers may convert the balance in the account at the time of departure of the tourist from India to foreign currency for payment to the account holder provided the account has been maintained for a period not exceeding six months and the account has not been credited with any local funds, other than interest accrued thereon.
The amount due/ payable to non-resident nominee from the account of a deceased account holder, shall be credited to NRO account of the nominee with an authorised dealer/ authorised bank in India.
Difference Between NRO Account and NRE Account :Change of Resident Status of Account holder
Change of Resident Status of Account holder under Non-Resident (External) Rupee Account Scheme – NRE Account
NRE accounts should be re-designated as resident accounts or the funds held in these accounts may be transferred to the RFC accounts (if the account holder is eligible for maintaining RFC account) at the option of the account holder immediately upon the return of the account holder to India for taking up employment or for carrying on business or vocation or for any other purpose indicating intention to stay in India for an uncertain period. Where the account holder is only on a short visit to India, the account may continue to be treated as NRE account even during his stay in India.
Change of Resident Status of Account holder under Non-Resident Ordinary Rupee Account Scheme -NRO Account
(a) From Resident to Non-resident
When a person resident in India leaves India for a country (other than Nepal or Bhutan) for taking up employment, or for carrying on business or vocation outside India or for any other purpose indicating his intention to stay outside India for an uncertain period, his existing account should be designated as a Non-Resident (Ordinary) account.
(b) From Non-resident to Resident
NRO accounts may be designated as resident rupee accounts on the return of the account holder to India for taking up employment, or for carrying on business or vocation or for any other purpose indicating his intention to stay in India for an uncertain period. Where the account holder is only on a temporary visit to India, the account should continue to be treated as non-resident during such visit.