NRO (Non-Resident Ordinary),NRE (Non-Resident External), and FCNR (Foreign Currency Non-Resident) accounts are types of bank accounts in India that cater to the financial needs of non-resident individuals. Each account serves a specific purpose and has distinct features.
Here's a brief overview of the differences between NRO, NRE, and FCNR accounts:
NRO (Non-Resident Ordinary) Account:
Purpose: NRO accounts are meant for managing income earned in India by non-residents. This can include rental income, dividends, or any other income generated within India.
Repatriation: The repatriation of funds from NRO accounts is subject to certain conditions and limitations. Repatriation refers to the transfer of funds from the NRO account to the account holder's foreign account.
Currency: NRO accounts can be maintained in Indian Rupees (INR).
Taxation: Interest earned on the NRO account is subject to taxation in India. The account holder needs to pay taxes in India on the interest income.
NRE (Non-Resident External) Account:
Purpose: NRE accounts are designed for non-resident Indians to maintain and manage their foreign income in India. It allows depositing foreign currency earnings into an Indian account.
Repatriation: NRE accounts offer full repatriation, meaning both principal and interest can be freely transferred abroad without any restrictions.
Currency: NRE accounts are maintained in foreign currencies, such as USD, GBP, EUR, etc.
Taxation: Interest earned on the NRE account is tax-free in India. However, the account holder may have tax obligations in their country of residence.
FCNR (Foreign Currency Non-Resident) Account:
Purpose: FCNR accounts are also designed for non-resident Indians, allowing them to hold their foreign earnings in designated foreign currencies.
Repatriation: Like NRE accounts, FCNR accounts offer full repatriation, allowing both principal and interest to be freely repatriated.
Currency: FCNR accounts are maintained in specific foreign currencies, such as USD, GBP, EUR, JPY, etc.
Taxation: Interest earned on FCNR accounts is tax-free in India. However, similar to NRE accounts, the account holder may have tax obligations in their country of residence.
In summary, the main differences lie in the purpose, repatriation rules, currency denomination, and taxation of interest income.
NRO accounts are for income earned in India, have limited repatriation, and are maintained in INR. NRE and FCNR accounts are for foreign income, allow full repatriation, and are maintained in foreign currencies, with the primary difference being the type of foreign currencies they support.
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