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Difference Between NRI and NRE Accounts

 NRI vs NRE Accounts

India is one of the many Asian countries with a high rate of migration to other countries like the U.S. and in Europe. It’s because Indians have a high propensity for learning English which is a big plus for those seeking employment, education, or business in those places. Because of this, a large part of India’s economy is dependent on money that is sent home as savings or for family members.

In order to help their citizens working abroad, the Indian government gave them special classifications to help speed up bank transactions and to give them options as to what kind of bank accounts to open. These are called ‘Non-Resident Indian’ and ‘Non-Resident External’ accounts.

Basically, all these types of bank accounts are given to Indian citizens who are not residing in India but wish to keep their earnings in their homeland. They are referred to as ‘non-resident Indians’ or ‘NRI.’ Under India’s laws, an NRI is working or doing business abroad, working for foreign government entities like the U.N., or working as government representatives in foreign lands.

There’s confusion between an NRI and an NRE account because both refer to banking services offered to Indians who are residing abroad. In reality, an NRI or non-resident Indian refers to citizens and not an account of any kind. It’s just being used as a representation. ‘NRE’ or ‘non-resident external’ is a type of bank account opened by Indians who are away from their country or for NRI’s.

Under NRI banking, there is another type of account aside from an NRE. It’s called ‘NRO’ or ‘non-resident ordinary.’ The two accounts have significant differences from each other which every NRI should know about. But before we delve into what sets them apart one from the other, it’s essential to understand why Indians have this setup.

The majority of Indians who migrate to other countries do so because of their desire to earn more money or get better education. When they have achieved their goals, they usually go back or find ways to help their families back home. One good way to do this is to open a bank account in India. Not only does this make it easier for NRIs to send and save money in India, but using the right kind of account gives them tax privileges.

Only NRI’s are allowed to open either an NRE or NRO bank account in accordance with Indian banking laws. While both types serve a similar purpose, they each have features unique from one another. ‘NRE’ allows remittances in the form of foreign currencies and can be withdrawn in rupees based on prevailing exchange rates. However, depositing rupees into the account is not allowed. ‘NRO,’ on the other hand, is for NRI’s who are staying in India. So adding rupees in the account is authorized.

‘Repatriation’ or ‘sending money abroad’ in different currencies is allowed in an NRE while it is disallowed for NRO accounts. Simply put, NRI’s who are away from India are allowed to deposit money of any kind into their NRE accounts which they can use tax free while an NRO account is used for NRI’s who are staying in India. In any case, it’s important to have both accounts if possible.

Summary:
1. ‘NRI’ refers to an Indian citizen who is working or living abroad while ‘NRE’ is a type of bank account created for NRI’s.
2. There are two types of NRI accounts: Non-resident external and Non-resident ordinary.
3. NRE’s allow remittances in foreign denominations while an NRO is for the local currency or rupees.
4. NRE funds can be sent to other countries using the same currencies while an NRO is for rupee transactions only.


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2 Comments

  1. hi
    nri holders can get loan or not?

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