NRE account is freely repatriable (Principal and interest earned) while the NRO account is non-repatriable. Repatriability from NRE account, is allowed up to USD 250,000 net of applicable taxes in a financial year after giving undertaking along with a certificate from a chartered accountant.
NRE account is Tax free (no Income tax, wealth tax and gift tax) in India. On the other hand the interest earned in NRO account and credit balances are subject to respective income tax bracket and are also subject to applicable wealth and gift tax.
If an NRI/PIO/OCI is earning income originating in India (such as salary, rent, dividends etc.) he/she is only allowed to deposit it in NRO account. Deposit of such earnings is not permitted in NRE account.
NRE account can be iointly held with another NRI but not with resident Indian. On the other hand NRO account can be held with NRI as well as resident Indian (close relative) as defined under Section 6 of the Companies Act 1956.
If the investment is made on a repatriation basis: The redemption proceeds and also the net income or capital gains (after tax) arising out of investment are eligible for repatriation, subject to compliance.
Funds need to be transferred from NRO to NRE account (after paying eligible taxes), post this repatriation is possible subject to a limit of USD 1 million FY.
