Remember, that the interest earned in the NRE account is tax free and the bank will deduct no TDS as well. There is a straight tax deducted at source by banks on interest in your NRO savings account, which is as high as 30 per cent.

Now, let's assume that you have an average balance of Rs 1,00,000 in your NRO Account. You would earn an interest of around 4 per cent in your NRO Account, since this is what banks presently offer.

Now, the bank would give you an interest of Rs 4000 and then deduct Rs 1200 on the Rs 4000 paid, as tax deducted at source.

In case of a NRE account, it is tax free and hence no TDS whatsoever is payable. Now, there is also another reason why your should always remit money into NRE Account. If you have an emergency in the country of residence, you cannot freely repatriate the balance in your NRO account to the country where you stay. There are certain caps and certain restrictions on repatriation.

Remember, that amounts in the NRE account are freely repatriable. This means you can ask your bank in India to remit amounts to a bank say in Dubai, if you need the money in Dubai.

It's always better to remit money into your NRE Account from abroad. Remember, you can always receive money into your NRO account from domestic residents, but, credit to a NRE Account can happen only when you remit from abroad or receive into your NRE Account from another NRI having an NRE account.

GoodReturns.in