NRI Bank Accounts in India – NRE, NRO, FCNR and Tax Implications

NRIs maintaining money, investments or income in India generally need bank accounts specifically permitted under the Foreign Exchange Management Act (FEMA). The most commonly used accounts are the Non-Resident External (NRE) Account, Non-Resident Ordinary (NRO) Account and Foreign Currency Non-Resident [FCNR(B)] Account.

Choosing the correct NRI bank account is important because the accounts have different rules relating to taxation of interest, TDS, source of funds, repatriation and foreign exchange risk.

Broadly, NRE accounts are commonly used for foreign earnings remitted to India, NRO accounts are used for income earned in India, while FCNR(B) deposits allow eligible NRIs to maintain term deposits in permitted foreign currencies.

The tax implications are also significantly different. Eligible NRE and FCNR interest can be exempt from Indian income tax, whereas interest earned on an NRO account is taxable in India.

NRIs requiring assistance with taxation of Indian income, TDS refunds or return filing can refer to our NRI Income Tax Return Filing Services.

What Are NRI Bank Accounts in India?

Who Is an NRI for FEMA Banking Purposes?

For FEMA purposes, an NRI generally means an Indian citizen who is a person resident outside India.

This concept should be distinguished from residential status under the Income-tax Act. A person may have one status under FEMA and a different status for income-tax purposes because the two laws apply different tests.

RBI provides detailed guidance in its official FAQs on Accounts in India by Non-Residents.

Why Should an NRI Not Continue an Ordinary Resident Bank Account?

When a person resident in India becomes a person resident outside India, the individual’s existing resident bank account should generally be redesignated as an NRO account in accordance with FEMA requirements.

Continuing to use an ordinary resident savings account after becoming non-resident can therefore create regulatory and banking compliance issues.

The individual should notify the bank promptly after the residential status changes.

Main Types of Bank Accounts Available to NRIs

NRE Account

A Non-Resident External Rupee Account (NRE Account) is an Indian rupee-denominated account generally used by NRIs and OCIs/PIOs to hold funds received from abroad and other permitted credits.

Funds in the account are generally freely repatriable, subject to applicable FEMA rules.

NRO Account

A Non-Resident Ordinary Rupee Account (NRO Account) is generally used to receive and manage legitimate income and transactions arising in India.

Examples include rent, dividend, pension, sale proceeds and other permitted Indian receipts.

Unlike NRE accounts, NRO balances are subject to restrictions on repatriation.

FCNR(B) Account

A Foreign Currency Non-Resident [FCNR(B)] Account allows eligible NRIs and OCI/PIO account holders to maintain term deposits in permitted freely convertible foreign currencies.

Since the deposit is denominated in foreign currency, it can help reduce exposure to fluctuations in the Indian rupee.

SNRR Account

A Special Non-Resident Rupee (SNRR) Account is different from the normal NRE/NRO banking arrangements.

It can be opened by a person resident outside India having a business interest in India for carrying out bona fide transactions in rupees connected with the permitted business activity.

It is generally a non-interest-bearing account and is more relevant to business transactions than ordinary personal NRI banking.

NRE Account – Features, Tax and Repatriation

Who Can Open an NRE Account?

NRE accounts may generally be opened by eligible NRIs and Persons of Indian Origin, including eligible OCI cardholders, in accordance with FEMA regulations.

The account is maintained with an authorised dealer or authorised bank in India.

Currency and Types of NRE Accounts

An NRE account is denominated in Indian rupees.

Depending upon the bank and applicable regulations, NRE accounts may be maintained as:

• savings accounts;
• current accounts;
• recurring deposits; or
• fixed deposits.

Foreign currency remitted into the account is converted into Indian rupees.

What Can Be Credited to an NRE Account?

Permitted credits can broadly include:

• inward remittances from outside India;
• transfers from another NRE or FCNR(B) account;
• interest earned on the account;
• maturity proceeds of eligible investments;
• eligible current income such as rent, dividend, pension or interest after applicable Indian taxes have been paid or provided for; and
• other credits specifically permitted under FEMA.

The authorised dealer bank may request supporting documents before accepting certain Indian-source income into an NRE account.

Are NRE Funds Repatriable?

Yes. Funds held in an NRE account are generally freely repatriable outside India, including principal and eligible interest, subject to compliance with applicable FEMA regulations.

This is one of the principal differences between an NRE and NRO account.

NRO Account – Features, Tax and Repatriation

Who Can Open an NRO Account?

A person resident outside India may generally maintain an NRO account for bona fide rupee transactions in India.

The account is particularly useful where the person continues to receive income in India after becoming non-resident.

Typical receipts include:

• rent from Indian property;
• pension;
• dividends;
• interest;
• sale proceeds;
• maturity proceeds;
• legitimate dues in India; and
• permitted gifts or transfers.

What Can Be Credited to an NRO Account?

Permitted credits generally include inward remittances from outside India, legitimate dues receivable in India and transfers from other NRO accounts.

Indian rental income, pension and other legitimate Indian receipts are commonly routed through an NRO account.

What Payments Can Be Made From an NRO Account?

An NRO account may generally be used for local payments in India and transfers to other eligible NRO accounts.

Current income may also be remitted abroad, subject to applicable taxes and documentation.

The account therefore functions as the principal rupee account for many NRIs having continuing financial commitments or income in India.

Are NRO Funds Freely Repatriable?

Not in the same manner as NRE funds.

Current income such as eligible rent, dividend, pension and interest can generally be remitted abroad after satisfying applicable tax requirements.

Apart from current income, eligible NRI/PIO balances may generally be remitted up to USD 1 million per financial year, subject to conditions prescribed under FEMA.

RBI explains this facility in its FAQs on Accounts in India by Non-Residents.

FCNR(B) Account – Foreign Currency Deposits for NRIs

Who Can Open an FCNR(B) Account?

Eligible NRIs and OCI/PIO account holders may generally open an FCNR(B) deposit with an authorised bank in India.

Unlike an NRE or NRO account, an FCNR(B) account is maintained in permitted foreign currency rather than Indian rupees.

Currency and Nature of FCNR(B) Deposits

FCNR(B) accounts can be maintained in permitted freely convertible foreign currencies accepted by the bank.

They are maintained only as term deposits, rather than normal savings or current accounts.

The available currencies, tenure and interest rates depend upon RBI rules and the bank’s product offering.

How Does FCNR Reduce Currency Risk?

Suppose an NRI living in the USA converts US dollars into rupees and places them in an NRE fixed deposit.

If the rupee depreciates substantially before the deposit is converted back into dollars, part of the return can be lost through exchange-rate movement.

An FCNR(B) deposit remains denominated in the selected foreign currency and therefore helps reduce this rupee-conversion risk.

Are FCNR Principal and Interest Repatriable?

FCNR(B) deposits are generally repatriable, subject to applicable FEMA regulations.

Eligible interest on FCNR(B) deposits can also receive favourable Indian income-tax treatment while the prescribed conditions continue to be satisfied.

NRIs choosing between NRE and FCNR deposits should therefore consider both interest rates and currency exposure.

NRE vs NRO Account – What Is the Difference?

Difference in Taxation

The most important tax distinction is that eligible NRE account interest is exempt from income tax in India, provided the statutory conditions are satisfied.

NRO account interest, on the other hand, is taxable in India.

The Income Tax Department has confirmed that the NRE interest exemption available under the earlier Section 10(4)(ii) continues under Schedule IV of the Income-tax Act, 2025.

See the Income Tax Department’s Non-Resident FAQs.

Difference in Repatriation

NRE balances are generally freely repatriable.

NRO balances are subject to FEMA restrictions, although current income may generally be remitted and eligible balances may be remitted up to USD 1 million per financial year subject to applicable conditions.

Difference in Source and Use of Funds

NRE accounts are primarily suitable for overseas funds remitted to India and other permitted credits.

NRO accounts are particularly suitable for managing Indian-source receipts such as rent, pension and other legitimate dues.

An NRI can maintain both NRE and NRO accounts simultaneously where required.

NRE vs FCNR(B) Account – Which Is Better?

Indian Rupee vs Foreign Currency Exposure

The principal difference is currency.

An NRE deposit is denominated in Indian rupees. Therefore, the value ultimately received after conversion back into foreign currency depends partly upon exchange-rate movements.

An FCNR(B) deposit remains denominated in the selected permitted foreign currency.

Which Account Is More Suitable?

An NRE account can be useful where the NRI expects to spend or invest funds in India and is comfortable taking rupee exposure.

An FCNR(B) deposit may be preferable where the investor wishes to retain foreign currency exposure and reduce the effect of INR depreciation.

The decision should not be based solely on the headline deposit interest rate.

Taxation of NRI Bank Accounts in India

Taxation of NRE Interest

Interest earned on an eligible NRE account is exempt from Indian income tax provided the individual continues to satisfy the applicable statutory conditions.

Importantly, this exemption is linked to the person qualifying as resident outside India under FEMA or otherwise being permitted by RBI to maintain the account.

The Income-tax Act, 2025 has continued this exemption in Schedule IV without withdrawing the substantive benefit.

Taxation of FCNR(B) Interest

Interest earned on eligible FCNR(B) deposits can also be exempt from income tax in India where the prescribed conditions are satisfied.

This is one reason FCNR deposits can be attractive for eligible NRIs wishing to hold foreign-currency deposits in India.

The individual’s residential and FEMA status should nevertheless be reviewed where the person returns permanently to India.

Taxation of NRO Interest

Interest earned on NRO savings accounts, fixed deposits and recurring deposits is generally taxable in India.

The Income Tax Department’s guidance for non-residents confirms the taxable nature of NRO interest.

If the final Indian tax liability is lower than the tax deducted by the bank, the excess TDS may generally be claimed as a refund through the applicable Indian income-tax return.

For assistance with such refunds, see our NRI Income Tax Return Filing Services.

TDS on NRO Account Interest

What Is the TDS Rate on NRO Interest?

Banks generally deduct TDS on taxable NRO interest at 30% plus applicable surcharge and 4% Health and Education Cess, subject to the applicable provisions and any available DTAA benefit.

The bank may therefore deduct more than 30% from the gross interest credited to the NRO account.

The applicable treatment should be checked for the relevant tax year, particularly where treaty relief is available.

Is There a Normal Bank Interest Threshold for an NRI?

The resident-bank-interest TDS framework and its thresholds should not simply be applied to an NRI’s NRO deposit.

NRO interest is subject to the withholding rules applicable to payments to non-residents.

Further, the normal resident declarations such as Form 15G or Form 15H should not be assumed to be available to an NRI for avoiding tax deduction on NRO interest.

Can Excess TDS on NRO Interest Be Refunded?

Yes.

TDS is only tax collected in advance; it is not necessarily the NRI’s final tax liability.

If tax deducted by the bank exceeds the final liability after considering total taxable income, applicable treaty benefit and other permissible relief, the NRI may claim the excess as a refund by filing an income-tax return in India.

DTAA Benefits on NRO Account Interest

Can DTAA Reduce Tax on NRO Interest?

Potentially, yes.

India has entered into Double Taxation Avoidance Agreements with numerous countries. The interest article of the relevant DTAA may restrict India’s tax rate on qualifying interest where the treaty conditions are satisfied.

Accordingly, an NRI residing in a treaty country should compare the domestic tax treatment with the applicable treaty rate before accepting the default withholding position.

Our detailed guide on DTAA Benefits for NRI explains the process.

TRC and Form 41 for Treaty Benefits

From 1 April 2026, a non-resident seeking DTAA benefits in India should review the requirements relating to a valid Tax Residency Certificate (TRC) and Form 41, which replaces the earlier Form 10F.

Banks may require appropriate treaty documents before applying a reduced DTAA withholding rate.

NRIs should therefore arrange the documentation before interest is credited wherever possible rather than waiting until after higher TDS has already been deducted.

Repatriation of Money From NRI Bank Accounts

Repatriation From NRE and FCNR Accounts

Eligible balances in NRE and FCNR(B) accounts are generally freely repatriable.

This makes these accounts particularly suitable for NRIs who want flexibility to bring overseas funds into India while preserving the ability to subsequently transfer eligible funds abroad.

Repatriation of Current Income From NRO Account

Current income such as eligible rent, dividend, pension and interest can generally be remitted outside India after the applicable Indian taxes have been deducted, paid or appropriately provided for.

The authorised dealer bank may request documentary evidence relating to both the source of income and tax compliance.

USD 1 Million Facility for NRO Balances

Apart from current income, NRIs/PIOs may generally remit eligible balances from the NRO account up to USD 1 million per financial year (April to March), subject to applicable FEMA conditions.

This limit can cover other eligible assets/remittances under the same facility and should therefore be considered on an aggregate basis.

For remittances requiring income-tax reporting from 1 April 2026, the applicability of Form 145 and Form 146, which replace the earlier Forms 15CA and 15CB, should also be examined.

See our Form 145 and Form 146 Filing Services.

Transfer From NRO to NRE Account

Is NRO to NRE Transfer Allowed?

Yes, subject to applicable FEMA conditions.

RBI permits eligible funds in an NRO account to be transferred to an NRE account within the USD 1 million per financial year remittance facility.

The transfer is therefore not automatically prohibited merely because the funds originally accumulated in an NRO account.

What Documents May Be Required?

The authorised dealer bank may require documents supporting:

• source of the funds;
• bank statements;
• underlying transaction;
• tax payment;
• income-tax return;
• TDS records;
• sale or investment documents; and
• applicable remittance/tax certification.

Where relevant, the requirements of Form 145 and Form 146 under the Income-tax Act, 2025 should also be reviewed.

The precise documentation varies according to the source and nature of funds.

Joint NRI Accounts and Power of Attorney

Joint Holding of an NRE Account

An NRE account may generally be held jointly by two or more eligible NRIs/PIOs.

It may also be held with an eligible resident relative on a former or survivor basis, subject to RBI conditions.

The resident relative’s operational authority during the lifetime of the NRI account holder is restricted according to the applicable FEMA framework.

Joint Holding of an NRO Account

NRO accounts may generally be held jointly with other NRIs/PIOs.

They may also be held jointly with resident persons on a former-or-survivor basis as permitted under applicable RBI regulations.

The bank should be informed of the correct residential status of every account holder.

Can a Resident Power of Attorney Operate an NRI Account?

An NRI may authorise a resident Power of Attorney holder to undertake permitted local operations on the account.

However, a Power of Attorney does not give unrestricted authority to undertake transactions prohibited under FEMA.

Banks generally impose specific operational conditions and may require their prescribed POA documentation.

What Happens to Existing Bank Accounts When a Resident Becomes an NRI?

Resident Account Should Generally Become NRO

When an Indian resident leaves India and becomes a person resident outside India under FEMA, the existing resident rupee bank account should generally be redesignated as an NRO account.

It is therefore important to update the bank after moving abroad for employment, business or another purpose indicating an intention to stay outside India for an uncertain period.

Update KYC and Residential Status

The bank may ask for updated:

• passport;
• visa or residence permit;
• overseas address;
• PAN;
• FATCA/CRS declaration;
• contact information; and
• other KYC documents.

NRIs should similarly update their status with financial institutions such as mutual funds, depositories and brokers where applicable.

What Happens to NRI Accounts When an NRI Returns to India?

NRE and NRO Accounts After Permanent Return

Where an NRI returns to India permanently and becomes a person resident in India under FEMA, NRE accounts should generally be redesignated appropriately or eligible balances may be transferred to an RFC account.

NRO accounts may generally be redesignated as resident rupee accounts where the return indicates an intention to stay in India for an uncertain period.

For a detailed tax-planning discussion, see NRI Returning to India – Tax Planning and RNOR Benefits.

What Happens to FCNR(B) Deposits?

RBI permits banks, at their discretion and subject to prescribed conditions, to allow FCNR(B) deposits of returning Indians to continue until maturity at the contracted rate.

For other purposes, the deposits are treated as resident deposits from the date of return.

Upon maturity, they may generally be converted into a resident rupee deposit or RFC account where eligible.

Resident Foreign Currency Account

A returning NRI may be eligible to maintain a Resident Foreign Currency (RFC) Account.

Eligible foreign currency assets accumulated while non-resident and permitted NRE/FCNR balances can, subject to FEMA conditions, be credited to an RFC account after the person’s residential status changes.

RBI provides further guidance through its Master Directions on Foreign Currency Accounts.

Which Bank Account Should an NRI Choose?

For Salary or Savings Earned Outside India

Where the funds consist primarily of income earned abroad and the NRI wants to remit them to India while maintaining repatriability, an NRE account is generally the natural starting point.

Eligible NRE interest can also be tax-exempt in India while the required conditions are satisfied.

For Rent, Pension or Other Income Earned in India

Where the NRI receives rental income, pension or other legitimate Indian-source income, an NRO account is generally appropriate.

The tax implications of the underlying income must still be considered separately.

For example, rent earned from Indian property remains taxable according to applicable income-tax provisions even though it is credited to an NRO account.

For Maintaining Foreign Currency Deposits in India

Where an NRI wants to keep funds in foreign currency and avoid direct INR exchange-rate exposure, an FCNR(B) deposit may be more suitable.

The final decision should consider:

• purpose of the funds;
• currency requirements;
• expected use in India;
• repatriation needs;
• interest rates;
• exchange-rate risk; and
• Indian and overseas taxation.

Frequently Asked Questions About NRI Bank Accounts

Can an NRI Have Both NRE and NRO Accounts?

Yes.

An NRI can maintain both accounts where eligible.

The NRE account may primarily be used for permitted foreign-origin funds and freely repatriable balances, while the NRO account can be used for managing Indian-source income and other legitimate rupee transactions.

Is NRE Interest Always Tax-Free in India?

NRE interest can be exempt from Indian income tax provided the statutory conditions continue to be satisfied.

Importantly, the exemption is linked to the individual’s FEMA status and RBI permission to maintain the account.

An individual returning permanently to India should therefore not assume that NRE interest continues to remain exempt merely because the person qualifies as RNOR under income-tax law.

Can an NRI Send NRO Money Outside India?

Yes, subject to applicable conditions.

Eligible current income can generally be remitted after meeting tax requirements. Other eligible NRO balances may generally be remitted under the USD 1 million per financial year facility, subject to FEMA conditions and bank documentation.

Related Services, Reviewed By and Disclaimer

Related Services

• NRI Income Tax Return Filing Services
• NRI Taxation Services in India
• NRI Tax Advisory Services
• DTAA Benefits for NRI
• NRI Returning to India – Tax Planning and RNOR Benefits
• Sale of Property by NRI – Tax, TDS and Other Implications
• International Tax Advisory Services
• Direct Tax Advisory Services
• Form 145 and Form 146 Filing Services
• Contact EzyBiz India

Reviewed By

CA Anil Agrawal
Founder, EzyBiz India Consulting LLP

Chartered Accountant with more than 20 years of professional experience in Indian taxation, NRI taxation, international taxation, FEMA and cross-border advisory.

Last Reviewed: September 2026

Disclaimer

The information provided on this page is for general informational and educational purposes only and should not be construed as legal, tax, investment, banking, FEMA or regulatory advice.

The eligibility, taxation and repatriation rules applicable to NRE, NRO, FCNR(B), RFC and other accounts depend upon the account holder’s residential status, citizenship, source of funds, nature of income, FEMA regulations, applicable tax treaty and the facts of each transaction.

The Income-tax Act, 2025 applies from 1 April 2026. Matters relating to earlier tax years may continue to be governed by the Income-tax Act, 1961 and the corresponding rules applicable to those periods.

Tax rates, TDS provisions, treaty rates, banking requirements, forms and FEMA regulations may change from time to time. The authorised dealer bank may also require additional documents depending upon the source and destination of funds.

Professional advice should therefore be obtained based on the specific circumstances before opening or redesignating an account, transferring money from NRO to NRE, claiming DTAA benefits, repatriating funds outside India or filing an Indian income-tax return.

EzyBiz India Consulting LLP does not accept responsibility for any action taken solely on the basis of the general information contained on this page without a specific professional review.