Side by side
| NRE | NRO | FCNR(B) | |
|---|---|---|---|
| Currency | Rupees | Rupees | Foreign currency (e.g. USD, GBP, EUR) |
| What goes in | Money earned abroad | Indian income — rent, dividends, pension, sale proceeds | Money earned abroad, as a term deposit |
| Interest taxed in India? | No | Yes — TDS at 30% plus surcharge and cess, or the treaty rate | No, while you’re non-resident |
| Repatriation | Freely repatriable | Up to USD 1 million per financial year, with forms | Freely repatriable |
| Currency risk | Yes (rupee) | Yes (rupee) | No — stays in foreign currency |
NRE account
- For money you earn outside India and bring in. Balances and interest can be moved back abroad freely.
- Interest is exempt from Indian tax while you’re a non-resident — it may still be taxable in your country of residence.
- You can’t deposit Indian income (like rent) into it.
NRO account
- For income earned in India — rent, dividends, pension, and proceeds from selling Indian assets.
- Interest is taxable; banks deduct TDS at 30% plus surcharge and cess by default. You can claim a lower treaty rate with a tax residency certificate and Form 41 (formerly 10F).
- You can repatriate up to USD 1 million per financial year from NRO balances and sale proceeds, with Form 145 and, where needed, a CA certificate in Form 146. See repatriation.
FCNR(B) deposit
- A term deposit held in foreign currency, so there’s no rupee exchange risk.
- Interest is tax-free in India for non-residents, and principal and interest are fully repatriable.
- Useful if you plan to take the money back out in the same currency.
Common mistakes
- Keeping an ordinary resident savings account after becoming an NRI — it should be redesignated as NRO.
- Letting the bank deduct 30% on NRO interest when a treaty rate would apply.
- Putting Indian rent into an NRE account.
- Not filing an Indian return to recover excess TDS — see NRI income tax return.
When you return to India
Once you become resident, NRE and NRO accounts should be redesignated as resident accounts (or foreign-currency balances moved to an RFC account), and NRE/FCNR interest stops being exempt from the point you’re resident. Returning NRIs are often RNOR for a period — check with the residential status calculator.
Rates and slabs: income tax for NRIs in India — slabs, TDS and DTAA.
Frequently asked questions
What is the difference between NRE and NRO accounts?
An NRE account holds money earned abroad; its interest is tax-free in India and it is freely repatriable. An NRO account holds Indian income such as rent and sale proceeds; its interest is taxable and repatriation is limited to USD 1 million per financial year.
Is NRO account interest taxable?
Yes. Banks deduct TDS at 30% plus surcharge and cess by default; a lower treaty rate can be claimed with a tax residency certificate and Form 41.
Is FCNR interest taxable in India?
Interest on FCNR(B) deposits is not taxed in India while the depositor is a non-resident; it may be taxable in the country of residence.
What happens to NRE and NRO accounts when I return to India?
They should be redesignated as resident accounts (or foreign currency moved to an RFC account) once you become resident, and interest exemptions end from that point.
Please note: this guide is general information based on the rules as they stood on the review date above. Regulations and RBI/CBDT procedures change often — please get advice on your specific facts before acting.