NRE vs NRO Account: Which to Use for Investing?
The NRE vs NRO distinction is one of the most-asked questions by NRIs planning to invest in India. Both are Indian rupee accounts held at Indian banks, but their tax treatment and repatriation rules are fundamentally different. Choosing wrong can create unnecessary tax friction.
NRE vs NRO: the key differences
- NRE: funded by foreign income; interest is tax-free in India; fully repatriable; joint only with another NRI
- NRO: holds India-sourced income (rent, dividends, pension); interest taxed at 30%; repatriation capped at $1M/year
- NRE: exchange rate risk on the principal (your INR deposit was converted from a foreign currency)
- NRO: no exchange rate risk on existing India-earned income
- For most investment activity: NRE is preferred unless you have significant India-sourced income
Tax treaty benefits for NRO interest
India has tax treaties with over 90 countries. If you're an NRI resident in a treaty country, NRO account interest may be taxed at a reduced rate. For example, under the India–UK treaty, the NRO interest withholding rate is 15% vs the standard 30%. To claim treaty benefits, submit Form 15G/15H or file an ITR to claim a refund of excess TDS.
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