NRE vs NRO vs FCNR Accounts: Tax, TDS and Repatriation Explained
Once you become a Non-Resident Indian under FEMA, you cannot continue to hold an ordinary resident savings account. Your banking in India has to move into special NRI accounts. Each type has different tax and repatriation rules. Here is a simple comparison.
The three accounts at a glance
| NRE (Non-Resident External) | NRO (Non-Resident Ordinary) | FCNR(B) (Foreign Currency Non-Resident) | |
|---|---|---|---|
| Currency | Indian rupees | Indian rupees | Foreign currency (USD, GBP, EUR etc.) |
| Money you can deposit | Foreign earnings sent to India | Indian income (rent, dividends, pension, sale proceeds) and foreign money | Foreign earnings |
| Interest taxable in India? | No, exempt | Yes, fully taxable | No, exempt |
| TDS on interest | Nil | 30% + surcharge + 4% cess (about 31.2%) | Nil |
| Repatriation (sending money abroad) | Freely repatriable (principal and interest) | Up to USD 1 million per financial year, with CA certificate | Freely repatriable |
| Exchange-rate risk | Yes (held in rupees) | Yes | No (held in foreign currency) |
| Account types | Savings, current, fixed deposit | Savings, current, fixed deposit | Term deposits only (1–5 years) |
Tax on NRE and FCNR interest
Interest on NRE and FCNR accounts is exempt from Indian income tax for a person who is non-resident (or not ordinarily resident, for FCNR) under FEMA. The Income Tax Department has confirmed the NRE interest exemption continues under the Income-tax Act, 2025, where it now sits in the schedule of exempt incomes.
Remember: whether NRE interest is tax-free depends on your status under FEMA. Once you move back and become resident, you should redesignate the NRE account to a resident account or an RFC (Resident Foreign Currency) account. After that, the interest becomes taxable.
Tax on NRO interest
NRO interest is taxable at slab rates as income from other sources. The bank deducts TDS at 30% plus surcharge and cess (about 31.2%) under section 393(2) of the 2025 Act (old section 195), with no threshold.
Ways to reduce it:
- Tax treaty (DTAA) rate: for example, under the India–UAE treaty, interest can be taxed at 12.5%. You need to give the bank a Tax Residency Certificate and Form 41 (formerly Form 10F).
- Lower TDS certificate on Form 128 if your total Indian income is low.
- File an ITR and claim back the extra TDS.
Form 15G/15H (now Form 121) cannot be used by NRIs to avoid TDS. Those declarations are only for residents.
Repatriation rules
- NRE and FCNR: fully repatriable at any time.
- NRO: up to USD 1 million per financial year in total, from NRO balances and from the sale of assets (including inherited assets), for genuine purposes, after tax is paid. The bank needs Form 145 (formerly 15CA) and, where the payment is taxable and more than ₹5 lakh, a CA certificate on Form 146 (formerly 15CB).
- Transfer from NRO to NRE counts as repatriation and follows the same rules.
Joint holding
- NRE: can be held jointly with another NRI, or with a resident close relative on a “former or survivor” basis. The resident can operate it only on behalf of the NRI.
- NRO: can be held jointly with residents.
What to do when you…
…become an NRI (move abroad):
- Tell your bank and convert your savings accounts to NRO.
- Open an NRE account for foreign earnings you send home.
- Update your residential status with your mutual funds, demat account and insurers.
…move back to India:
- Redesignate NRE and NRO accounts as resident accounts.
- FCNR deposits can run until maturity. Interest stays exempt while you are RNOR.
- Consider an RFC account to keep foreign currency.
Frequently asked questions
Is NRE interest taxable in my country of residence?
It may be, because many countries tax their residents on worldwide income. India’s exemption does not stop your home country from taxing it.
Can I deposit Indian rent into an NRE account?
No. Indian income must go into the NRO account.
Should I keep money in NRE or FCNR?
FCNR protects you from changes in the exchange rate. NRE gives you rupee interest rates and flexibility (savings and fixed deposits). The right choice depends on your goals and where you expect the rupee to go.
Does a resident savings account become illegal once I am an NRI?
FEMA requires it to be redesignated as an NRO account. Continuing to operate it as a resident account breaks FEMA rules.
Unsure about NRO TDS or repatriation paperwork? Garvita Jain & Co. helps NRIs claim treaty rates, issues Form 146 certificates and files returns to get refunds of NRO TDS. Contact us here, or at contact@garvitajainandco.com or +91 98678 16597.
This article is general information based on the law as of October 2026 and is not professional advice.
Sources
Official
- Income Tax Department, Non-Resident FAQs (NRE interest exemption retained)
- RBI Master Circular on NRO accounts / USD 1 million facility (check the latest RBI Master Direction, Deposits and Accounts, on rbi.org.in)
- Income Tax Department, Form 146 (CA certificate)
Professional / CA publications