[Solved] what is NRI and NRE accounts in simple?
- An NRE account is a bank account opened in India in the name of an NRI, to park his foreign earnings; whereas, an is a bank account opened in India in the name of an NRI, to manage the income earned by him in India. These incomes include rent, dividend, pension, interest, etc.
- NRE accounts are exempt from tax. Neither the balance, nor the interest earned on these accounts is taxable. The interest earned on an NRO account is however taxable at 30% according to the Income Tax Act 1961.
- The principle amount in an NRE account, and the interest accumulated thereon is open to repatriation. In other words, you can transfer these amounts to a foreign account in case of an NRE account. In case of an NRO account, the interest amount can be repatriated; however, in case of the principle amount, you can remit only up to USD 1 million in a financial year.
- An NRI can open a joint NRO account with one or more NRIs or Indian citizens. However, there can be a joint NRE account only with another NRI.
- Income originating outside India can be deposited into any of these accounts. However, income originating within India can be deposited only into the NRO account. Withdrawals from both the accounts can be made only in INR.
- In case of an NRO account, if the deposit as well as the withdrawal is made in INR, there is no risk involved; whereas, in case of an NRE account, currency fluctuations make you prone to exchange rate risks.