NRE vs NRO account in one line: an NRE (Non-Resident External) account holds money you earn abroad, is fully repatriable, and its interest is tax-free in India; an NRO (Non-Resident Ordinary) account holds money you earn in India (rent, dividends, pension, sale proceeds), its interest is taxed in India, and you can send out only up to US$1 million per financial year after tax, with Form 145 (formerly 15CA) and Form 146 (formerly 15CB). Most NRIs need both, and many should add an FCNR(B) deposit if they want to avoid rupee risk.
This guide covers what NRE means, how NRE, NRO and FCNR(B) differ, how interest is taxed in India and abroad, repatriation limits, and what to do with your accounts when you leave India and when you come back. Rules are stated as of tax year 2026-27.
What NRE and NRO mean
NRE means Non-Resident External. The word "external" is the clue: the money came from outside India. You fund it with foreign salary, savings or any inward remittance, and the balance plus interest can be sent back abroad at any time without limit.
NRO means Non-Resident Ordinary. It is the account for "ordinary" Indian-source money: rent from your flat in Pune, dividends from Indian shares, interest on old FDs, pension, or the proceeds when you sell property or mutual funds. It is also the account your old resident savings account must be converted into once you become an NRI.
Both are rupee accounts. The third option, FCNR(B) (Foreign Currency Non-Resident, Bank), is a term deposit held in a foreign currency such as US$, GBP, EUR or others the bank offers, so you do not take rupee depreciation risk.
NRE vs NRO vs FCNR(B): the comparison table
| Feature | NRE | NRO | FCNR(B) |
|---|---|---|---|
| Currency | Indian rupee | Indian rupee | Foreign currency (US$, GBP, EUR etc.) |
| Account types | Savings, current, FD/RD | Savings, current, FD/RD | Term deposit only (1 to 5 years) |
| What you can deposit | Inward remittances from abroad, transfers from other NRE/FCNR accounts, foreign currency brought in (with declaration where required), repatriable investment proceeds | Indian income (rent, dividends, pension, interest, sale proceeds), plus foreign remittances too | Inward remittances and transfers from NRE/FCNR |
| Can Indian income go in? | No | Yes | No |
| India tax on interest | Exempt while you are a non-resident under FEMA | Taxable; TDS at 30% plus surcharge and cess unless a treaty rate applies | Exempt for non-residents and RNORs |
| Repatriation | Fully and freely repatriable | Up to US$1 million per financial year, after tax, with Form 145/146 | Fully and freely repatriable |
| Joint holding | With another NRI; or with a resident relative on a "former or survivor" basis | With other NRIs or residents | With another NRI; or resident relative on "former or survivor" basis |
| Currency risk | Yours (rupee can fall) | Yours | None on principal, in the deposit currency |
| Transfers between them | NRE to NRO allowed freely | NRO to NRE only within the US$1M limit, after tax | Into NRE on maturity allowed |
Joint-holding and product details vary by bank, so check your bank's current terms before opening.
How the interest is taxed (India and abroad)
NRE interest
Interest on NRE savings and FDs is exempt in India for a person who is "resident outside India" under FEMA (Section 10(4)(ii) of the Income-tax Act, 1961; the new Income-tax Act, 2025, which took effect on 1 April 2026, renumbers these sections, but the exemption continues). There is no TDS and nothing to pay in India.
"Tax-free" means tax-free in India only. If you live in the US, UK, Canada or Australia, your country of residence taxes worldwide income, so NRE interest is taxable there. And because India charged no tax, there is no foreign tax credit to offset it. US residents also report NRE and NRO balances on FBAR and possibly Form 8938. In the UAE, Saudi Arabia or Qatar, where there is no personal income tax, NRE interest is genuinely tax-free.
NRO interest
NRO interest is taxable in India. Banks deduct TDS under section 393(2) of the Income-tax Act 2025 (formerly Section 195) at 30% plus 4% cess, i.e. 31.2%, with surcharge on top at higher income levels. You can bring this down in two ways:
- Treaty rate: give the bank a Tax Residency Certificate (TRC) from your country and Form 10F; under the India-US treaty, interest is taxed in India at up to 15%. See our US-India DTAA guide.
- File an Indian return: NRO interest is actually taxed at slab rates. If your total Indian income is low, you can claim a refund of excess TDS in your ITR. Our NRI ITR filing guide walks through it.
FCNR(B) interest
FCNR(B) interest is exempt in India for non-residents and for returning NRIs with RNOR status. Your country of residence may still tax it.
NRE FD rates vs NRO FD rates
Banks usually quote the same or similar rates for NRE and NRO FDs of the same tenure, and both track domestic FD rates. After the RBI's rate cuts in 2025, large banks were offering roughly 6% to 7% on one-to-three-year FDs (indicative; the repo rate has been 5.25% since the RBI's cuts). Check the bank's current card, because rates change often. Two rules matter more than the headline rate:
- NRE FDs must be for at least one year. If you break an NRE FD before 12 months, you usually get no interest.
- Compare post-tax, not pre-tax. A 7% NRO FD taxed at 31.2% gives you about 4.8% after Indian TDS. A 6.75% NRE FD gives you the full 6.75% in India. FCNR(B) rates on US$ deposits are lower in headline terms, but your principal stays in dollars.
Compare maturity values after tax and currency, not just the quoted rate.
Worked example: ₹20 lakh in NRE vs NRO
Anita works in Dubai and Rohan works in Seattle. Each has ₹20 lakh to put into a one-year FD at 7%, so the interest is ₹1,40,000.
| Anita (UAE) NRE | Anita (UAE) NRO | Rohan (US) NRE | Rohan (US) NRO with TRC | |
|---|---|---|---|---|
| Interest | ₹1,40,000 | ₹1,40,000 | ₹1,40,000 | ₹1,40,000 |
| India TDS | ₹0 | ₹43,680 (31.2%) | ₹0 | ₹21,000 (15%) |
| Home-country tax | Nil (no income tax) | Nil | Taxed at his US rate, say 24% = ₹33,600 | US tax ₹33,600 less ₹21,000 credit = ₹12,600 |
| Total tax | ₹0 | ₹43,680 (partly refundable via ITR) | ₹33,600 | ₹33,600 |
For Anita, NRE is clearly better. For Rohan, the total tax is roughly the same either way, because the US charges its own rate and credits Indian tax. What NRE saves him is paperwork and cash tied up in TDS. NRE is also fully repatriable, while NRO money is subject to the US$1M limit. The numbers are illustrative; exchange rates, state taxes and your bracket change the result.
Repatriation: the US$1 million NRO limit
Money in NRE and FCNR(B) can go abroad anytime, without limit. NRO balances follow the RBI's US$1 million scheme:
- You can remit up to US$1 million per financial year (April to March) from NRO balances. This includes sale proceeds of property and other assets held in India.
- Tax must be paid or deducted first. For most transfers you file Form 145 online, and above ₹5 lakh you usually also need Form 146, a certificate from a chartered accountant.
- This is not the Liberalised Remittance Scheme. LRS is for residents, and NRO repatriation does not attract TCS. See our LRS and TCS guide for how residents send money.
Planning a large exit, such as selling a flat? Spread it across financial years if the proceeds exceed US$1M. Read how to repatriate money from India.
When you become an NRI: converting your accounts
Under FEMA, once you leave India for employment or with the intention of staying abroad, your resident savings account has to be redesignated as an NRO account. There is no specific grace period in the rules, and banks expect you to tell them "promptly". In practice:
- Tell each bank about your change in status and submit your passport, visa or work permit, overseas address proof and updated KYC. Most banks let you do this online.
- Your savings account and FDs become NRO. Existing FDs usually continue to maturity, and interest is then taxed as NRO interest.
- Open an NRE account for your foreign earnings. Route your salary savings there, not into the NRO account.
- Update your demat and mutual fund folios to NRI status, linked to the right bank account. Investments made from NRE are repatriable, and those made from NRO are non-repatriable. See mutual fund investing as an NRI.
- PPF: you cannot open a new one, but an existing one can run to maturity.
Not sure whether you are an NRI for tax purposes? Tax residency (days in India) and FEMA status (intention and purpose of stay) are separate tests. Check yours with the residential status calculator.
When you return to India: RFC and redesignation
When you move back for good, you become a person resident in India under FEMA straight away, and your NRI accounts must change:
- NRE and NRO savings are redesignated as resident accounts. From then on, NRE interest is no longer tax-exempt.
- RFC (Resident Foreign Currency) account: you can move NRE/FCNR balances and foreign money into an RFC account and keep them in foreign currency, free of RBI repatriation limits. This is useful if you might move abroad again or want dollar exposure.
- FCNR(B) deposits can usually continue to maturity at the contracted rate. Interest stays exempt in India while you are an RNOR. At maturity, the money moves to RFC or a resident account.
- NRE FDs may be allowed to run to maturity at the contracted rate, but the interest is taxable once you are resident. Bank practice varies.
The RNOR window, which can last up to 2-3 years after return, is valuable for timing all of this. Read our RNOR guide and model your move with the return-to-India planner.
Which accounts do you actually need?
- Salaried NRI with no Indian income: an NRE savings account plus NRE FDs or FCNR(B). You may not need an NRO account at all, but most people keep one because a redesignated old account becomes one.
- NRI with Indian rent, dividends or a pension: NRE for foreign money and NRO to receive Indian income. Pay Indian EMIs (for example, an NRI home loan) from either account.
- NRI worried about the rupee or planning to return to a dollar life: add FCNR(B).
- Gulf NRI: NRE is the most tax-efficient home for savings, since the interest is untaxed in both countries.
Which mix fits you depends on your income sources, your country of residence and whether you plan to return. FinPlann's NRI plan maps your accounts, taxes and repatriation needs together.
Common mistakes
- Keeping a resident savings account after leaving. This breaches FEMA. Redesignate it to NRO.
- Depositing Indian income into NRE. Rent, dividends and Indian sale proceeds cannot go into NRE. Banks reverse such credits, and it is a compliance issue.
- Parking foreign salary in NRO. You pay tax on the interest in India and lock the money behind the US$1M limit and Form 145/146 paperwork.
- Assuming NRE interest is tax-free everywhere. US, UK and Canadian residents must report it at home.
- Paying 31.2% TDS on NRO interest when a treaty rate or refund is available. Submit a TRC and Form 10F, or file an ITR.
- Breaking an NRE FD before one year. Usually no interest is paid.
- Forgetting to redesignate accounts on return. Claiming NRE exemption after you become resident creates back taxes and interest.
Checklist
- Tell every Indian bank, depository and AMC about your NRI status.
- Resident savings account converted to NRO; NRE opened for foreign money.
- TRC and Form 10F submitted for NRO interest each year, if your country has a favourable treaty.
- Indian ITR filed if you have NRO interest, rent or capital gains.
- NRE and NRO balances reported abroad where required (FBAR/FATCA in the US).
- Return plan: RFC account, FCNR maturity dates, RNOR years mapped out.
Bottom line
Keep foreign money in NRE (or FCNR(B) if you want to stay in foreign currency), keep Indian income in NRO, and do not mix the two. The account choice affects tax, repatriation and paperwork for years. This is general information, not personal advice. Confirm your situation with a CA or cross-border tax advisor. To see your accounts, taxes and return-to-India timeline in one plan, start with our NRI planning hub.