Managing money across borders can be confusing, especially when income arises in different countries and needs to be handled in India. A clear view of the three common routes helps NRIs stay organised and compliant.
This article explains what each account does, outlines the differences, and provides practical checkpoints to help decide on the suitable option.
What Each Account Means
When people compare NRE vs NRO account, they are usually separating foreign income from Indian income.
- NRE Account: Keeps eligible foreign earnings in India in Indian Rupees. It is typically used to save overseas income and to make permissible transfers in line with current regulations.
- NRO Account: Collects income that arises in India, for example, rent, dividends, interest, or pension. It is used for local payments and day-to-day expenses in Indian.
- PIS Account: The Portfolio Investment Scheme is a facility linked to an NRE or NRO account that enables NRIs to transact in listed Indian shares through a registered broker, subject to regulatory conditions.
When to Choose Which Option
Selecting the right path depends on the source and use of funds. If earnings are received abroad and need to be held in INR, NRE generally fits that purpose. Where funds come from Indian sources, an NRO account is the standard route for receiving and paying within India. Consider adding PIS only if equity market participation is intended and permitted through the chosen bank and broker.
Typical Use Scenarios
Here are the typical use scenarios:
- Salary credited overseas and parked in India
- Rent received from the property in India and used for local bills
- Dividends from Indian shares and mutual funds
- Buying or selling listed shares through an authorised broker under PIS
PIS in Brief
PIS is not a deposit account. It is a permission layer that sits over an eligible bank account to route secondary market equity trades and associated reporting. Trades, limits, and documentation follow rules issued by regulators and the chosen bank’s processes. Separate PIS links are usually maintained for the NRE and NRO legs, so record-keeping stays clear.
Tax, Repatriation and Documentation
Here you will explore the tax, repatriation, and documentation:
- Tax treatment: NRE interest is exempt under Indian law for eligible NRIs, while NRO interest is taxable in India with TDS as per the rules in force. Capital gains from equity under PIS are taxed according to the applicable slabs and holding period norms.
- Repatriation: Movement of funds from NRE and NRO accounts is subject to defined regulatory limits and paperwork requirements. Keep bank certificates, Form 15CA/CB where relevant, and broker contract notes handy to support transactions.
- Compliance hygiene: Track the source of each inflow, retain proof of remittances, and review residential status annually, as it can change with days of stay in India.
Quick Checklist Before Deciding
Here is the quick checklist:
- Map every income stream to the correct account type
- Avoid mixing Indian and foreign income in the same pot
- Confirm whether equity trades require a PIS or non-PIS route under the current framework
- Review fees, documentation, and turnaround times with the chosen bank and broker
- Revisit the setup each year to align with tax residency and cash-flow needs
Conclusion
NRE, NRO, and PIS serve different roles. Match the account to the source of funds, keep documentation in order, and review rules before every transfer or trade. For process steps and service details, refer to IDFC FIRST Bank’s official resources.
Also Read ; Retirement Plans in India: Why NRIs Need a Whole New Financial Playbook
