NRE vs NRO Account: Meaning, Tax, Repatriation and Rules
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NRE means Non-Resident External; NRO means Non-Resident Ordinary. Both are rupee accounts in India for people living abroad. Use an NRE account for money you earn abroad: it is fully repatriable and its interest is tax-free in India. Use an NRO account for income in India, such as rent or pension: its interest is taxable, and balances can be sent abroad up to USD 1 million a financial year.
- Who can open
- NRIs and PIOs (including OCI cardholders living abroad)
- Currency
- Both in Indian rupees
- NRE money abroad
- Fully repatriable
- NRO money abroad
- Current income, plus up to USD 1 million per April–March year
- NRE interest
- Exempt from Indian income tax
- NRO interest
- Taxable; bank deducts TDS
- Rules
- FEMA Deposit Regulations, 2016 (RBI)
- Interest rates
- Set by each bank; check the latest with your bank
Who is an NRI? FEMA vs income tax
Whether you may hold an NRE or NRO account depends on FEMA, not on the income-tax day count. The two tests are different, and you can fall on different sides of them in the same year.
| Test | What the official text says | Used for |
|---|---|---|
| FEMA (bank accounts) | A person resident in India is one "residing in India for more than one hundred and eighty-two days during the course of the preceding financial year", but not someone who has gone or stays abroad for employment, business, or any other purpose showing an intention to stay outside India "for an uncertain period". An NRI is a person resident outside India who is a citizen of India. | Who may hold NRE, NRO and FCNR(B) accounts, and whether NRE interest is tax-exempt |
| Income tax (your tax return) | You are resident if you are in India for 182 days or more in the year, or 60 days or more in the year plus 365 days or more in the four years before. Special rules apply to Indian citizens and people of Indian origin visiting India. | Which of your income is taxed in India |
The Income Tax Department says the NRE interest exemption was "based on the FEMA definition" of a person resident outside India rather than tax residency, and that the Income-tax Act, 2025 keeps this distinction.
NRE vs NRO vs FCNR(B): side by side
| Feature | NRE | NRO | FCNR(B) |
|---|---|---|---|
| Who can open | NRIs and PIOs | Any person resident outside India, for genuine rupee transactions | NRIs and PIOs |
| Currency | Indian rupees | Indian rupees | A freely convertible foreign currency |
| Account types | Savings, current, recurring, fixed deposit | Savings, current, recurring, fixed deposit | Fixed (term) deposit only |
| Fixed deposit period | 1 to 3 years; banks may accept longer | Same as resident accounts | 1 to 5 years |
| What can be credited | Money sent from abroad, its interest, transfers from other NRE/FCNR(B) accounts, and proceeds of investments made from it. Income in India only if it has not lost its repatriable character. | Money sent from abroad, legitimate dues in India (rent, dividend, pension, sale proceeds), transfers from other NRO accounts, and a rupee gift or loan from a resident relative within LRS limits | Money sent from abroad |
| Sending money abroad | Fully repatriable | Current income freely; other balances up to USD 1 million per financial year (April–March), after tax | Fully repatriable |
| Tax on interest | Exempt | Taxable | Check with your bank |
| Joint holder | Other NRIs/PIOs; or a resident relative on "former or survivor" basis | Other NRIs/PIOs; or residents on "former or survivor" basis | Same as NRE |
| Exchange-rate risk | Yours (balance is in rupees) | Yours (balance is in rupees) | None on the deposit itself (held in foreign currency) |
Source: RBI page "Accounts in India by Non-residents" (as on 16 Jan 2025). Banks set their own interest rates within RBI's rules; check the latest rates with your bank.
How money flows into NRE and NRO
Getting money in: money from abroad arrives as an international wire through SWIFT. Once it is in your NRE account, you can pay people in India or move it between your own accounts using NEFT, IMPS or RTGS. Do not pay rupee income earned in India into an NRE account; it belongs in NRO.
NRE, NRO and returning to India
- Best for: savings from your earnings abroad that you may want to take back.
- Credits: fresh remittances from abroad, transfers from another NRE or FCNR(B) account, foreign currency notes or travellers' cheques you bring on a visit (with a currency declaration form above the customs limits), and income from investments made on a repatriable basis.
- Debits: local payments in India, remittances abroad, transfers to other NRE/FCNR(B) accounts, and investments in India.
- Tax: interest is exempt from income tax while you are a person resident outside India under FEMA. Under the Income-tax Act, 2025 this exemption sits in Schedule IV (it was section 10(4)(ii) of the 1961 Act).
- Joint with a resident: allowed only with a resident relative, on "former or survivor" basis. The relative can operate it only as your Power of Attorney holder during your lifetime.
- Example (SBI): savings, current, term and recurring deposits; deposits from 1 to 10 years; you can open online, by post, or at a branch.
- Best for: income that arises in India: rent, pension, dividends, interest, sale proceeds of property or shares.
- When you move abroad: your existing resident savings account should be designated as an NRO account. Tell your bank.
- Debits: local payments, transfers to other NRO accounts, and remittance of current income abroad.
- Sending other balances abroad: up to USD 1 million per financial year (April–March), together with your other eligible assets, under FEMA's Remittance of Assets Regulations, 2016. Moving money to your NRE account counts towards the same limit. Your bank will ask for tax documents and an undertaking about the source of funds.
- Tax: interest is taxable in India. Banks deduct TDS at 30% plus any surcharge and 4% cess (31.2% when no surcharge applies), or at the treaty rate if you live in a country with which India has a DTAA. Check the rate your bank applies.
- Post Office: a Post Office savings account can also be held by a non-resident, on the same terms as an NRO account.
- NRE: must be designated as a resident account, or its money moved to an RFC account, at your choice, immediately when you return to take up employment or your residential status changes.
- NRO: may be designated as a resident account when you return to stay in India for an uncertain period.
- FCNR(B) deposits: may continue until maturity at the agreed rate. On maturity, the bank converts them into a resident rupee deposit or an RFC account, at your choice.
- RFC account: a foreign-currency account in India for returning residents (savings, current or term). The bank decides its interest rate.
- NRE interest stops being exempt once you are no longer a person resident outside India under FEMA.
What to do when you return to India
- Tell every bank where you hold NRE, NRO or FCNR(B) accounts that you are back.
- Redesignate NRE as a resident account, or move its money to an RFC account.
- Redesignate NRO as a resident account.
- Let FCNR(B) deposits run to maturity if you wish; then choose a resident deposit or RFC.
- Update your KYC with your Indian address.
Opening an NRE or NRO account
- How: most banks let you apply online, post a filled form with attested copies of your documents to a branch in India, or visit a branch in India or abroad.
- Documents: the bank does KYC. Expect your passport, proof of your overseas status and address, and your PAN or Form 60. Ask your bank for its exact list.
- Pakistan and Bangladesh: nationals and entities of Pakistan, and entities of Bangladesh, need RBI's prior approval; Bangladeshi individuals with a valid visa and residential permit can open an NRO account.
- Nepal and Bhutan: at SBI, NRIs living in Nepal or Bhutan cannot open an NRO account.
Stay safe: your bank will never ask for your card PIN, MPIN or OTP by phone, email or chat. Report fraud on 1930 or cybercrime.gov.in. Unresolved complaints against your bank can go to the RBI Ombudsman after 30 days.
History
The Foreign Exchange Management Act (FEMA) defines who is a person resident in India.
RBI issues the FEMA Deposit Regulations (FEMA 5(R)) and the Remittance of Assets Regulations (FEMA 13(R)), which set the NRO USD 1 million limit.
RBI updates its guidance on accounts in India by non-residents.
The Income-tax Act, 2025 takes effect. The NRE interest exemption moves to Schedule IV, unchanged.
FAQs
What is the full form of NRE and NRO?
NRE is Non-Resident External and NRO is Non-Resident Ordinary. Both are rupee accounts for people resident outside India.
Which is better, NRE or NRO?
They do different jobs. Keep money earned abroad in NRE (tax-free interest, fully repatriable). Income in India, such as rent or pension, must go to NRO. Many NRIs hold both.
Is NRE account interest taxable in India?
No, while you are a person resident outside India under FEMA. The exemption was section 10(4)(ii) of the 1961 Act and is in Schedule IV of the Income-tax Act, 2025. Your country of residence may still tax it.
How much money can I send abroad from my NRO account?
Current income such as rent, dividend, pension and interest, plus up to USD 1 million per financial year (April–March) from other balances and eligible assets, after tax.
Can I transfer money from NRO to NRE?
Yes, within the same USD 1 million per financial year limit, with the documents your bank asks for.
Must I convert my savings account to NRO when I move abroad?
Yes. RBI says that when a resident becomes a person resident outside India, the existing resident account should be designated as an NRO account.
Can my parent in India be a joint holder?
Yes, as a resident relative on "former or survivor" basis, with you as the first holder. On an NRE account the relative can operate only as your Power of Attorney holder during your lifetime.
What happens to my NRE account when I return to India?
It must be made a resident account, or its money moved to an RFC account, as soon as you return for employment or your status changes.
Who sets NRE and NRO interest rates?
Each bank, within RBI's guidelines. Check the latest rates with your bank.
Official sources
- RBI – Accounts in India by Non-residents (FAQ, as on 16 Jan 2025) (accessed 31 Oct 2026)
- RBI – Foreign Currency Accounts by Resident Individuals (FAQ, FEMA section 2(v) definition and RFC account, 16 Jan 2025) (accessed 31 Oct 2026)
- Income Tax Department – Non Resident FAQs (NRE exemption under the Income-tax Act, 2025) (accessed 31 Oct 2026)
- Income Tax Department – Non-Resident Individual (residential status) (accessed 31 Oct 2026)
- SBI – NRE Account (updated 7 Feb 2026) (accessed 31 Oct 2026)
- SBI – NRO Account, TDS and repatriation (updated 7 Feb 2026) (accessed 31 Oct 2026)
- Income Tax Department – TDS rate for NRIs on interest from Indian bank deposits (accessed 1 Nov 2026)
- Ministry of Home Affairs – National Cybercrime Reporting Portal (accessed 31 Oct 2026)
- PIB – Income-tax Act, 2025 comes into force from 1 April 2026 (accessed 31 Oct 2026)
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