NRE and NRO accounts: the basic difference explained
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Non resident Indians who want to hold funds in an Indian bank generally choose between two main account types, each designed for a different purpose. An NRE account, or non resident external account, is meant for foreign income that has been earned overseas and is being brought into India, while an NRO account, or non resident ordinary account, is meant for income that already originates within India.
A key practical distinction lies in repatriation and currency treatment. Funds held in an NRE account are generally kept in rupees but are considered fully and freely transferable back overseas, since the underlying money originated abroad. An NRO account, by contrast, typically holds income such as rent, dividends or pension that arises inside India, and moving those funds overseas usually involves additional compliance steps.
Interest earned on each account type is also treated differently for Indian tax purposes, which is one reason many non resident Indians end up holding both an NRE and an NRO account rather than relying on just one. Because rules around these accounts can change and depend on individual circumstances, it is worth treating this as a starting point for understanding the concept rather than a complete guide to current requirements.