NRE vs NRO vs FCNR: Differences, Tax and Which NRI Account to Choose

An NRE account holds money you earn abroad, in rupees, tax-free and fully repatriable. An NRO account holds money you earn in India, such as rent, dividends or pension, and its interest is taxed. An FCNR deposit keeps your savings in a foreign currency such as US dollars, so it is tax-free and carries no rupee risk.

Once you become a non-resident Indian (NRI) under FEMA, you cannot keep using an ordinary resident savings account, so the choice between these three decides how your money is taxed and whether you can send it back abroad. Most NRIs end up with an NRE and an NRO account, and add an FCNR deposit for savings they want to keep in dollars or pounds.

Updated October 2026 for the Income-tax Act, 2025 and RBI's current rules.

Key takeaways

• NRE: foreign income held in rupees; interest tax-free; principal and interest fully repatriable.
• NRO: Indian income held in rupees; interest taxed, usually with TDS deducted; current income can go abroad freely, other balances up to USD 1 million a financial year.
• FCNR: a fixed deposit in a foreign currency for 1 to 5 years; interest tax-free; no exchange-rate risk on the principal.
• Your resident savings account must become an NRO account once you become an NRI; it cannot become an NRE account.
• NRE and FCNR can be held jointly with a resident relative on a 'former or survivor' basis; NRO can be held jointly with any resident.
• When you return to India, NRE and NRO accounts become resident accounts, while an FCNR deposit can run to maturity.

For the joint-holding rule, while the NRI is alive the resident relative can operate an NRE or FCNR account only as a power of attorney holder (RBI Master Direction on Deposits and Accounts, paras 4.3, 5.3 and 6.6).

The difference is where the money comes from. An NRE account takes money earned outside India, so its interest is tax-free and everything in it can be sent back abroad. An NRO account takes money earned in India, so its interest is taxed and only current income can go abroad freely.

An NRO account can also receive money from abroad, but anything sent to it loses full repatriability, so foreign savings belong in NRE. Neither is better in general; they do different jobs. Most NRIs need both, because Indian income such as rent cannot be credited to an NRE account, while foreign savings parked in NRO lose the tax exemption and become harder to send back. Money can move from NRE to NRO freely, but the other way only within the USD 1 million limit (see nro to nre transfer).

An NRE fixed deposit usually pays a higher rate but in rupees, so a falling rupee can cancel the extra interest; an FCNR deposit pays a lower rate in dollars or pounds with no exchange risk. Choose FCNR if you will spend the money abroad, and NRE if you will spend it in India.

Worked example with illustrative rates: you have $10,000 and the rupee is at ₹95.

So in the FCNR vs NRE FD choice, the question is whether you expect the rupee to fall by more than about 5.9% over the term. Two more points: FCNR is a fixed deposit only, from 1 to 5 years, and banks set their own currency list and rates within RBI's ceiling (the currency's overnight reference rate plus 2.5 percentage points for 1 to 3 years, plus 3.5 points for 3 to 5 years).

To convert NRE to FCNR, ask your bank to book an FCNR deposit from your NRE balance; it converts the rupees at its selling rate. Breaking an NRE fixed deposit before one year earns no interest.

Interest on NRE accounts and FCNR deposits is tax-free in India while you are a non-resident; interest on NRO is taxable, and the bank deducts TDS before paying it.

• NRE interest is exempt under Schedule IV of the Income-tax Act, 2025 (in force from 1 April 2026; item 1, formerly section 10(4)(ii)).
• FCNR interest is exempt under Schedule IV (item 14, formerly section 10(15)(iv)(fa)), and stays exempt while you are 'resident but not ordinarily resident' (RNOR) after returning.
• NRO interest has TDS under section 393(2) (formerly section 195), usually 30% plus cess for individuals.

You can reduce NRO TDS if India has a tax treaty (DTAA) with your country of residence: give the bank a tax residency certificate (TRC), Form 10F and your PAN, and it can deduct at the treaty rate, often 10% to 15% on interest. If more tax was deducted than you owe, file an Indian income tax return to claim the refund. Tax-free in India does not mean tax-free everywhere: if you live in a country that taxes worldwide income, such as the US, UK or Canada, interest on NRE and FCNR deposits is usually taxable there and must be reported, and a treaty credit may apply for Indian tax paid on NRO interest.

Yes. Money can move freely from NRE to NRO and from NRE into an FCNR deposit, but from NRO to NRE only within USD 1 million a financial year, after tax is paid.

For NRO remittances abroad, you file Form 145 (formerly Form 15CA) online, and above ₹5 lakh you also need Form 146 (formerly Form 15CB), a chartered accountant's certificate. The USD 1 million limit covers all your NRO balances across banks, and transfers to NRE count towards it (RBI Master Direction, para 6.8; FEMA Remittance of Assets Regulations, 2016).

Open an NRE account for money you earn abroad and an NRO account for income you still earn in India; add an FCNR deposit only for savings you want to keep in a foreign currency.

• Working abroad and sending money home for family or investments: NRE.
• Earning rent, dividends or pension in India: NRO, which your old savings account becomes.
• Saving for a goal abroad, such as a child's university fees in the US: FCNR in that currency.
• Planning to return to India in a few years: NRE or FCNR deposits that mature around your return, then an RFC account.
• Wanting a parent in India on the account: NRO with any resident, or NRE with the parent as a 'former or survivor' joint holder.

If you run a business or freelance from India, client payments for that work are export income and belong in your own resident or EEFC account, not your NRE account. Providers such as Xflow give you local receiving account details abroad and settle rupees to your Indian bank account with an eFIRA for every international transaction.

You must tell your bank once you return to live in India: NRE and NRO accounts are then redesignated as resident accounts, while an FCNR deposit can run to maturity at its agreed rate.

• NRE: redesignate as a resident account, or move the money to a Resident Foreign Currency (RFC) account, immediately on return. An NRE fixed deposit can be broken early to move into RFC with no penalty.
• NRO: redesignate as a resident account.
• FCNR: can continue to maturity at the contracted rate, then moves to a resident or RFC account. Its interest stays tax-free while you are RNOR.

Keeping NRI accounts after you become resident breaks FEMA rules and can lead to penalties; see fema guidelines for nri.

NRE and FCNR accounts are for NRIs and OCI or PIO cardholders; an NRO account can be opened by any person resident outside India, including a foreign national visiting India. Citizens of Pakistan, and entities owned by Pakistan or Bangladesh, need the RBI's prior approval.

You are an NRI under FEMA when you leave India for a job, a business or any purpose showing you intend to stay abroad for an uncertain period. This differs from the 182-day test in the Income-tax Act, which decides only your tax residence.

You can usually open these accounts from abroad: apply online, then complete a video KYC or send copies attested by an Indian embassy, a notary or the bank's overseas branch, depending on the bank. Opening an FCNR deposit needs an NRE account or a remittance from abroad to fund it.

Most problems come from putting money in the wrong account or not updating the bank when your status changes.