NRI Bank Accounts Explained in Simple Language

NRIs and foreign nationals of Indian origin (PIO), residing overseas can open bank accounts in India without seeking any permission from the Indian government authorities abiding by NRI taxation and NRI tax rules.

Basically, there are two types of bank accounts that NRI/PIO can maintain in India.

These are:

1. Non-Resident External Account commonly referred to as an NRE account
2. Non-Resident Ordinary Account referred to as NRO account

Difference between NRE and NRO account

NRE Account:

• According to NRI tax laws, money in NRE accounts can be repatriated abroad by the account holder. When you make a deposit in NRE accounts, the money is converted to Indian rupees and held in your NRE account. When you with draw money from this account and want to have it sent abroad, the Rupee amount withdrawn is then converted to the foreign currency.
• According to Indian income tax rules for NRI, no income tax is payable on the income earned by way of interest on NRE accounts. Hence no TDS is deducted from NRE accounts. While NRE account earnings are not taxable in India, they may be taxable in the foreign country you reside in.
• NRE accounts cannot be held jointly with Indian residents. They can be held jointly with NRIs only.

NRO Account:

• Repatriation from NRO accounts is generally not freely allowed.
• Interest earned on NRO accounts is taxable in India and may also be taxable in the foreign country you reside in. TDS is deducted by banks from NRO accounts. 
• NRO accounts can be held jointly with Indian residents.

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