NRE & NRO: Full Form and Key Differences

Difference Between NRE & NRO Account

NRE and NRO Full Form

  • Non-Residential External (NRE)
  • Non- Resident Ordinary (NRO)

As an NRI, you have access to two primary types of accounts: Non-Residential External (NRE) Accounts and Non-Resident Ordinary (NRO) Accounts.

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Differences Between NRO And NRE Accounts


NRE Account

NRO Account

Account Currency

Indian Rupees (INR)

Indian Rupees (INR)

Source of Funds

Foreign earnings and remittances

Income earned in India

Taxation on Interest

Usually tax-free in India

Subject to taxation in India (TDS applied)


Can be used for local payments in India

Can be used for local payments in India


Investment, savings, and transactions

Managing income earned in India

Interest Earnings

Tax-free interest earned

Taxable interest earnings (subject to TDS)

Purpose of Account

Mainly for foreign income

Mainly for Indian income

Foreign Exchange Risk

No risk as account is in INR

Subject to foreign exchange risk

“NRE” and “NRO” are terms often used in the context of banking and financial accounts for Non-Resident Indians (NRIs) in India. These terms refer to two different types of accounts that NRIs can hold in Indian banks:

  1. NRE (Non-Residential External) Account: An NRE account is a type of bank account that allows NRIs to park and manage their foreign earnings in Indian rupees. The key features of an NRE account include:
  • It is maintained in Indian rupees (INR).
  • Funds in this account can be freely repatriated (transferred back) to the foreign country of the account holder without any restrictions.
  • Both the principal amount and the interest earned in the account are freely repatriable.
  • The account can be used for various transactions, including investments, remittances, and bill payments in India.
  • Interest earned on NRE account balances is usually tax-free in India.

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  1. NRO (Non-Resident Ordinary) Account: An NRO account is another type of bank account designed for NRIs to manage income earned in India. The main features of an NRO account are:
  • It can be maintained in Indian rupees (INR).
  • It is used to manage income earned in India, such as rental income, dividends, pensions, etc.
  • Funds in this account can be repatriated up to a certain limit (usually $1 million per financial year) after fulfilling certain conditions and obtaining necessary approvals.
  • The interest earned on NRO account balances is subject to taxation in India. Tax deduction at source (TDS) is usually applied to the interest earned.
  • NRO accounts can be used for local payments and transactions within India.

The key distinction between NRE and NRO accounts lies in the nature of the funds and their repatriation. NRE accounts are primarily meant for foreign earnings that are brought into India and can be repatriated freely, while NRO accounts are used for income earned within India and have more limited repatriation options.

Note: It’s important to note that these regulations and features may be subject to change, so it’s recommended to consult with a financial advisor or the relevant authorities for the most up-to-date information before making any financial decisions.

LenDenClub is India’s largest alternate investment platform which started operations in India in 2015. We have been helping lenders diversify their investments beyond traditional investment instruments ever since.



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*This is an annualized yield and is subject to the maximum FMPP tenure, which is 5 years. P2P lending is subject to high risk and may cause an entire loss of principal.

*P2P lending is subject to risks. And lending decisions taken by a lender on the basis of this information are at the discretion of the lender, and LenDenClub does not guarantee that the loan amount will be recovered from the borrower.

** Average value mentioned is the weighted average of simple interest received by lenders

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