NRE vs NRO vs FCNR accounts: tax and repatriation for NRIs (2026)

Every NRI with money in India ends up asking the same question: which account should this money sit in? India gives non-residents three main options: the NRE account, the NRO account and the FCNR(B) deposit. They differ on three things that matter to you: where the money can come from, how the interest is taxed in India, and how easily you can take the money back abroad. This guide explains each one in plain terms, using the position under the new Income-tax Act, 2025, which applies from 1 April 2026.

The three accounts in one minute

NRE (Non-Resident External) account. A rupee account meant for money you earn or hold outside India. When you send dollars, pounds or dirhams to it, the bank converts them into rupees. You can spend the balance in India or send it back abroad freely.

NRO (Non-Resident Ordinary) account. A rupee account for money that arises in India: rent, dividends, pension, interest, sale proceeds of Indian assets and similar receipts. When you become an NRI, your old resident savings account should be redesignated as an NRO account. Keeping a resident account after you move abroad is a FEMA problem in itself.

FCNR(B) (Foreign Currency Non-Resident, Bank) deposit. A term deposit held in a permitted foreign currency such as USD, GBP or EUR. Your money is never converted into rupees, so a fall in the rupee does not reduce your principal. It is a fixed deposit only. There is no FCNR savings account, and terms generally run from one to five years.

Side-by-side comparison

How the interest is taxed in India

NRE interest: exempt, but only on FEMA status

Under the Income-tax Act, 2025, interest on an NRE account is kept out of total income through Schedule IV (entry 1). This replaces section 10(4)(ii) of the old 1961 Act. The exemption applies to an individual who is a "person resident outside India" under FEMA, or who has RBI permission to keep the account. There is no cap on the amount and the bank deducts no TDS.

Note the test. It is your FEMA status, not the 182-day income-tax test. You can be non-resident for income tax and still not qualify, or the other way round. The question FEMA asks is whether you have gone abroad to work, study or live for an uncertain period.

NRO interest: fully taxable

Interest on NRO savings and fixed deposits is taxable in India like any other Indian income. Banks deduct TDS at 30% plus surcharge (where applicable) and 4% cess. For most NRIs that works out to about 31.2%. Under the new Act, TDS on payments to non-residents sits in section 393, which replaced section 195. NRIs cannot file Form 15G or 15H to stop this deduction.

TDS is not your final tax. If your total Indian income is low, you may owe much less, and you can claim the excess back by filing a return. If you live in a treaty country, the DTAA may cap India's tax on interest. To get the treaty rate at source, banks usually ask for your PAN, a Tax Residency Certificate and Form 10F. See our DTAA and TRC guide for the process.

FCNR interest: exempt, and for longer

Interest on FCNR(B) deposits is also exempt in India. The old section 10(15)(iv)(fa) exemption is carried into Schedule IV of the 2025 Act. It covers a non-resident, and also an individual who is resident but not ordinarily resident (RNOR). That last part matters a lot to people moving back, as explained below.

Repatriation: getting money out of India

NRE and FCNR. Principal and interest can be sent abroad freely. This is the main reason to route foreign savings through these accounts.

NRO. Two separate routes apply:

• Current income such as rent, dividend, pension and interest can be remitted after tax, without counting toward the USD 1 million limit.
• Other balances, such as sale proceeds of property or old savings, can be remitted up to USD 1 million per financial year (April to March), subject to tax being paid and the bank's documents.

You can also move eligible money from NRO to NRE within the same USD 1 million facility. Once it is in NRE, future interest on it is tax-free in India. Banks usually ask for Form 145 (earlier Form 15CA) and, where required, a CA certificate in Form 146 (earlier Form 15CB). Check the bank's current list before you start. For property sale proceeds, see our guide on selling property in India as an NRI.

Tax where you live: India's exemption is not the full story

NRE and FCNR interest is tax-free in India. Your country of residence may still tax it. The US and the UK generally tax their residents on worldwide interest, including NRE and FCNR interest. Because India charged no tax, there is no Indian tax to claim as a credit. The UAE does not tax personal interest income, so for UAE residents NRE and FCNR interest is usually tax-free on both sides.

US persons also need to think about account reporting, such as FBAR and FATCA forms, even when the interest is exempt in India. Take advice in your country on this.

Returning to India: what changes

When you come back to India to settle, your FEMA status changes from the date of return. From then on:

• NRE interest becomes taxable from your return date, even if you are still RNOR for income tax that year.
• You must tell your bank. NRE balances should be redesignated as resident accounts or moved into a Resident Foreign Currency (RFC) account.
• FCNR interest stays exempt while you are RNOR, which for many returning NRIs covers the first two or three years back. Banks may let an FCNR deposit run to maturity at the booked rate.
• NRO accounts should be redesignated as ordinary resident accounts.

If you are planning a move back, a short review of your deposits before the move can save tax. Our NRI income tax guide explains how residential status is worked out.

Which account should you use? A practical checklist

1. Confirm your FEMA status. If you have moved abroad for work or an uncertain period, tell your bank and convert resident accounts to NRO.
2. Send fresh overseas savings to an NRE account if you want rupee exposure, or an FCNR(B) deposit if you want to avoid currency risk.
3. Route Indian rent, dividends and pension into your NRO account.
4. Update your PAN with every bank. Without it, TDS can go up and refunds become hard.
5. Give your bank your TRC and Form 10F to get the treaty rate on NRO interest.
6. Check Form 168 (earlier Form 26AS) and AIS each year to confirm the TDS shown.
7. File an Indian return if TDS is more than your actual tax, or if you have other taxable Indian income.
8. Before any large remittance from NRO, keep proof of tax paid and the bank's required forms ready.
9. If you are returning to India, plan the NRE-to-RFC move and keep FCNR deposits running during your RNOR years where useful.

Need help with TDS refunds, treaty claims or your return? Our NRI tax filing service handles this online for NRIs in any country, or you can book a consultation.

Questions people ask

Sources

• Schedule IV, Income-tax Act 2025 (EZTax)
• NRE vs NRO vs FCNR Account 2026 (TaxClear)
• Tax on FD interest for NRIs: NRE, NRO and FCNR rules 2026 (Rupeeflo)

General information, not advice. Rules change and individual facts matter; take professional advice before acting.