—Guide
NRE, NRO and FCNR Accounts: Tax Treatment and When to Use Each
How NRE, NRO and FCNR accounts differ in funding, repatriation and tax, which to use for foreign earnings and Indian income, and what to do when your residential status changes.
NRIs can hold three main kinds of bank accounts in India. Using the right one matters for tax and for moving money out later. This guide explains each.
NRE (Non-Resident External) Account
- Funded with money earned abroad, in rupees.
- Principal and interest are fully repatriable.
- Interest is exempt from Indian tax while you're non-resident.
- Exposed to rupee exchange rate movements.
NRO (Non-Resident Ordinary) Account
- Holds Indian income — rent, dividends, pension, sale proceeds.
- Interest is taxable, with TDS at the NRI rate.
- Current income can be repatriated after tax; other balances within USD 1 million per financial year, with documents.
- A resident savings account must be redesignated as NRO when you become an NRI.
FCNR (Foreign Currency Non-Resident) Deposit
- Fixed deposits held in foreign currencies such as USD, GBP or EUR.
- Fully repatriable, with no rupee exchange risk.
- Interest is exempt while non-resident.
Which to Use
- Send savings from abroad to NRE or FCNR.
- Receive Indian income, such as rent, in NRO.
- Don't move Indian income into NRE; only foreign-sourced funds go there.
Tax in Your Country of Residence
Interest exempt in India may still be taxable where you live. US and UK residents, for example, usually report Indian interest in their home returns.
When You Return to India
On becoming resident, inform the bank. NRE accounts are redesignated as resident accounts or RFC accounts, and interest becomes taxable once you're ordinarily resident. FCNR deposits can run to maturity.
Getting Help
Think Filing advises NRIs on account structure, tax and repatriation.