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NRE vs NRO Bank Account in India for NRI

Published on Friday, June 21, 2019 by Chittorgarh.com Team | Modified on Thursday, May 13, 2021

Non-Resident External (NRE) bank account is for NRIs to transfer foreign earnings to India. Non-Resident Ordinary (NRO) bank account is for NRIs to manage the income earned in India (i.e. rent, dividend, pension, sale of property purchased before becoming an NRI).

In NRE Bank Account, both the principal and interest amount is freely repatriable. In the case of NRO Bank Account, the principal can be repatriable (up to $1M in a financial year) after certain paperwork with RBI.

To invest or trade in the Indian Stock Market, an NRI need NRE and/or NRO bank accounts. In brief:

NRE account (with PIS) is required to buy/sell stocks on a repatriation basis.
NRO account (without PIS) can be used to invest on a non-repatriation basis.
NRO account is required for trading in Equity Derivatives in India.
The dividend earned on stocks NRI owns in India is deposited in the NRO account. Thus if you hold dividend-paying stocks, you need an NRO bank account.

Below is a detail NRE & NRO account comparison. Find out the difference between an NRE & NRO account.

NRE Vs NRO Account

	Non-Resident External (NRE)	Non-Resident Ordinary (NRO)
Purpose	For NRIs to transfer foreign earnings to India.	For NRIs to manage the income earned in India i.e. rent, dividend, pension, sale of property purchased prior to becoming an NRI etc.
Who can open this account?	Any NRI (including PIO, OCI cardholder) can open an NRE account.	Any person resident outside India can open an NRO account. A Power of Attorney is usually given to a close relative in India to allow them to operate the account.
Joint Account?	NRE accounts can be opened by one or two NRIs as joint holders.	NRO accounts can be opened by an NRI along with an Indian resident or another NRI.
Source of Fund	Income earned in foreign countries can be deposited in this account.	Income earned in foreign as well as in India can be deposited in this account.
Deposits	Can deposit in foreign currency.	Can deposit in foreign as well as Indian currency.
Withdrawals	Money can be withdrawn from an NRE account in India as well as abroad. This is called repatriation.	Money can be withdrawn from an NRO account in India as well as abroad but only Indian currency. This is called non-repatriation basis.
Taxability	NRE accounts are exempt from tax. Interest earning is tax-free in India.	Earning is taxable at the rate of 30%. Interest, dividents and capital gains are taxable in India.
Repatriation of Fund	Both the principal and interest amount is freely repatriable.	The principal amount can be repatriable after submitting Form 15 CA and Form 15 CB to ensure that taxes are collected on the funds before they are remitted abroad. You can remit only up to $1 million in a financial year. 100% of the interest earn is repatriable on which TDS has already deducted.
Exchange Rate fluctuations Risk	Yes	No risk if deposit, as well as the withdrawal, is made in Indian Rupee.
Exposure	The account is exposed to the fluctuations in the value of the Indian Rupees for both the principal and interest.	The account holder is exposed to the fluctuations in the value of the Indian Rupee only for the interest component.
Who should open?	If you are an NRI and want to transfer foreign income to India. You could avoid taxation liabilities with NRE account.	If you are an NRI who has earnings in India; i.e. Rental, Stock Dividends, Interest, Pension, etc.
Stock Market Investment	NRE account (with PIS) is required to buy/sell stocks in India.	NRO account (Non-PIS) can also be used to buy/sell stocks in India on non-repatriation basis.
Equity Derivatives Trading	NRE account (with or without PIS) cannot be used for Equity F&O trading in India.	NRO account is required for trading in Equity Derivatives in India.
Mutual Fund Investment	Can use NRE Account for MF investment in India.	Can use NRO Account for MF investment in India. Only the capital appreciation is repatriable, not the principal amount.
IPO	Can apply in IPO using NRE account including PIS or Non-PIS Account. NRIs must furnish their bank details, besides the date of allotment and cost of acquisition of the shares to calculate the tax on any gains they may have made.	Can apply in IPO using NRO account.

Frequently Asked Questions

1. Does a broker charge different brokerage for NRO and NRE Account?
The brokerage fee for the NRO and NRE demat and trading account are the same. The NRE and NRO demat account works in a very similar way. The major difference is NRE bank account transactions are reported to RBI.

Following are the brokerage charged by popular stock brokers in India-
- Zerodha NRI brokerage is 0.1% or Rs 200(whichever is lower) for Equity delivery and flat Rs 100/trade for F&O.
- Sharekhan NRI brokerage is 0.50% of the transaction value for Equity Delivery, 0.1% on first leg and 0.02% on second leg for Equity Futures and Rs 250 per contract for Equity Options
- ICICI Bank NRI brokerage is 1.25% for Equity Delivery, 0.05% for Equity Future and Rs 95 per lot for Equity Options trading.
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2. How much minimum balance is required for NRI Trading?

The minimum balance requirement differs from bank to bank and can generally range anywhere between Rs 5,000 - Rs 25,000.

NRIs are required to maintain the minimum balance in the NRE and NRO accounts opened with the banks. The PIS account generally has no minimum balance requirement as each time an NRI trades, they are required to transfer the funds from NRE or NRO account to the PIS account as per the requirement.

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3. Can I transfer money from NRE to NRO account?

An NRE account is a repatriable account. Thus, an NRI can freely transfer funds from NRE to NRO account without any restrictions by initiating an online fund transfer request.

An NRI can also transfer funds from an NRE account to another NRE account.

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4. Can I transfer money from NRO to NRE account?

An NRO account is a non-repatriable account in nature. Thus, an NRI cannot freely transfer the funds from NRO to NRE account.

Earlier this transfer of funds from NRO to NRE account was strictly prohibited. However, RBI has now permitted to repatriate funds from NRO to NRE account to the extent of USD 1 million per financial year subject to certain restrictions and documentation.

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5. Can NRI open NRE and NRO trading accounts simultaneously?

An NRI is permitted to open two separate trading accounts i.e. NRE and NRO to trade on repatriation as well as non-repatriation basis simultaneously.

To trade on a repatriation basis, an NRI will additionally require PIS approval to be linked with the NRE trading account.

The PIS approval is not mandatory for trading on a non-repatriation basis. Thus, if your broker is providing the facility to trade without PIS for the NRO mode of transactions, PIS approval is not required to be linked with the NRO account.

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