Migration is as old as mankind's existence. Individuals and families move to different geographies for better opportunities. This idea of migration is very well captured by one of the finest writers in the English language V S Naipaul in his Nobel Prize Lecture: “The world is always in movement.”
Indians have been migrating across the world in search of jobs and better livelihood or education. This sizable Indian diaspora—Non-Resident Indians (NRIs) and persons of Indian origin is a large tribe and it is growing and has a robust financial bond with India. Let us understand the nuances which play a critical role in understanding the difference between NRE and a NRO account.
When can you open a NRE or NRO account?
Once a person is considered as an NRI under FEMA or IT Act. It is essential for them to open a Non-Resident External (NRE) or Non-Resident Ordinary (NRO) Account, to do any banking transactions in India. However, depending upon the transactional requirements of the person, he/she can decide to open either an NRE or NRO Account, or even both. It can help NRIs in two ways. One, they can send their foreign earnings to India at any point. Two, they can also retain their income from India (via any assets) in the home country itself.
How to open an NRO/NRE Accounts?
There are two ways:
1) One can convert their existing savings account to an NRE or NRO Account
2) One can also open an account from scratch in case a person doesn't have regular savings account under his/her name
Definition
Taxation
Transferability
Things to keep in mind while choosing NRE and NRO account
When an NRI is keen to invest in India, it makes sense to open an account with a reputed broker following due process. It helps in compliance and makes the repatriation easy. Also with the implementation of Double Taxation Avoidance Agreement (DTAA), NRIs will no longer have to pay double taxes for income earned by them.