For many UK-based Indians, banking in India remains essential. Whether it’s sending salary back home, managing rent from property, or transferring funds to parents, choosing between an NRE (Non-Resident External) and NRO (Non-Resident Ordinary) account is crucial. This guide explains the differences with clear scenarios, tax FAQs, and a decision tree.
What Is an NRE Account?
A Non-Resident External (NRE) account is for depositing foreign income earned outside India, such as UK salary. Money is held in INR, fully repatriable back to the UK, and interest earned is tax-free in India.
- Use for sending UK income to India
- Funds are fully repatriable
- Interest is tax-free in India
What Is an NRO Account?
A Non-Resident Ordinary (NRO) account is for managing income earned in India (rent, dividends, pensions). Funds are held in INR with limited repatriation (USD 1M/year). Interest is taxable in India at ~30% TDS.
- Use for Indian income like rent or pensions
- Funds partly repatriable with tax clearance
- Interest is taxable in India
Key Differences: NRE vs NRO
| Feature | NRE Account | NRO Account |
|---|---|---|
| Source of Funds | Overseas income (UK salary, business) | Indian income (rent, dividends, pensions) |
| Repatriation | 100% free | Limited to USD 1M/year with clearance |
| Currency | INR (funded via foreign currency) | INR (funded in INR or foreign currency) |
| Tax on Interest | Tax-free in India | Taxable (TDS ~30%) |
| Joint Holding | With another NRI | With NRI or Indian resident |
| Use Case | Send UK money into India | Manage Indian income locally |
Documents Required (UK NRIs)
- Indian passport + UK visa/BRP
- Proof of NRI/OCI/PIO status
- Proof of UK address (utility bill, bank statement)
- Indian PAN card
- Passport-size photos
- Completed bank KYC form
- For NRO repatriation: Form 15CA/CB + tax clearance
Scenarios: Which Account Should You Choose?
- UK Salary Transfer: NRE account (tax-free, repatriable)
- Indian Property Rent: NRO account (taxable, required locally)
- Supporting Parents: NRE account (funds in INR)
- Receiving Pension in India: NRO account
- Both UK Salary + Indian Income: Maintain both NRE & NRO
Mini Tax FAQ
- Is NRE interest taxable? No, exempt from Indian income tax.
- Is NRO interest taxable? Yes, 30% TDS applies.
- Can I repatriate money from NRO? Yes, up to USD 1M/year with CA certification.
- Is PAN mandatory? Yes, for both NRE and NRO.
- Can I convert my Indian savings account? Yes, must be converted to NRO when becoming NRI.
Common Mistakes to Avoid
- Using NRE account for Indian income (not allowed)
- Forgetting Form 15CA/CB before NRO remittance
- Not converting resident account to NRO after moving abroad
- Assuming NRO is tax-free
- Not updating UK address in bank KYC
Decision Tree: NRE vs NRO
- Earning abroad (UK salary)? → NRE
- Earning in India? → NRO
- Both? → Open both NRE & NRO
Frequently Asked Questions
Need Help?
DiuMitra provides advisory-only guidance for UK NRIs on NRE/NRO accounts, compliance, and safe transfers. We help you choose the right account and avoid costly mistakes.
⚠️ Disclaimer: All services are offered on an advisory basis only. We do not act as financial or legal representatives, and we do not guarantee outcomes. Banking and compliance remain the responsibility of the individual.
