Once you become an NRI, your old resident savings account is technically no longer valid — you're expected to convert to an NRE or NRO account (often both). They sound similar and confuse almost everyone. Here's the difference that actually matters.
The one-line difference
- NRE (Non-Resident External): for money you earn abroad and bring into India. Fully repatriable, and the interest is tax-free in India.
- NRO (Non-Resident Ordinary): for money you earn in India — rent, dividends, pension, a maturing FD. Interest is taxable in India, and repatriation is capped.
Side by side
| NRE | NRO | |
|---|---|---|
| Source of funds | Foreign income | Indian income |
| India tax on interest | Tax-free | Taxable (TDS applies) |
| Repatriation | Freely repatriable | Up to USD 1 million/financial year |
| Currency risk | You bear it (held in INR) | You bear it (held in INR) |
Which do you need?
Most NRIs need both: an NRE account to park foreign savings and send money home, and an NRO account to receive Indian rent, dividends, or a maturing deposit. If you only have Indian-source income, an NRO alone is enough.
Common mistakes
- Still using a resident savings account. After you're an NRI, this is non-compliant — convert it.
- Parking foreign salary in NRO. You lose the tax-free interest and cap yourself on repatriation. Use NRE.
- Ignoring the $1M NRO repatriation limit when planning a big move-back transfer.
This article is educational and not tax, legal, or investment advice. Cross-border rules change and depend on your specific residency and country. Confirm your situation with a qualified cross-border CA/CPA before acting.
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Frequently asked
Can I hold NRE/NRO jointly with a resident? NRO can be held jointly with a resident (on "former or survivor" basis); NRE typically with another NRI. Rules vary by bank — confirm.
Is NRE interest taxable in my country of residence? It may be — "tax-free" only refers to India. US residents, for example, still report it. See our DTAA guide.