Ask Money Today: NRO vs NRE accounts - which one to choose for stock market investment?
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Ask Money Today: NRO vs NRE accounts - which one to choose for stock market investment?

If an NRI has an income of any source from India, then NRO account will be advisable; If they have income only from outside India and want to remit in India, then NRE account is advisable

  • March 17, 2021  
  • |  
  • UPDATED   18:34 IST
Ask Money Today: NRO vs NRE accounts - which one to choose for stock market investment?

I am a 35-year-old NRI based in the US for the last two years. I am willing to start investing in mutual funds via SIP mode in India. I hear there are two types of bank accounts for NRIs. Which one should I choose for a simple process and better tax advantage?

- Ashwin Kumar

By Lionel Charles, CEO, IndiaFilings

You have an option to choose between the NRO (Non-Resident Ordinary) account and the NRE (Non-Resident External) account. Understand their features before zeroing in on one.

NRO account

If an NRI has an income of any source from India, then NRO account will be advisable to open so that the NRI can manage all the types of Indian income which is chargeable to tax in India. For example, person "A" has income from house property which is situated in India and the rental income earned out of it can be deposited in NRO Account. Likewise, interest on fixed deposits from India, etc.

NRO account is opened with a close relative's reference.

NRE account

If an NRI has income only from outside India and he wants to remit in India, then NRE account is advisable to open. This account can be used only to deposit or transfer foreign earned income. We can use it for investment in stock exchanges. Amount earned from this account in the form of dividend, interest and any capital gains will not be taxable in India. Hence, it will be tax free in India.

Verdict:

It is always better to go for an NRE account if an NRI wants to invest in stock exchanges.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)

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