You have just landed a job in Dubai or Toronto, and your bank in India sends a polite message: please update your residential status. Then come three abbreviations, NRE, NRO, FCNR, and a relationship manager who wants you to open all of them. Which ones do you actually need, and what happens to the savings account you already have?
This guide explains the NRE, NRO, FCNR accounts in plain terms: what each is for, what money can go in and out, how much you can send abroad, how the interest is taxed, who can be a joint holder and what you must do when you move abroad and when you come back. The rules come from the Reserve Bank of India’s regulations under the Foreign Exchange Management Act (FEMA) and its FAQs for non-residents.
Who counts as an NRI for bank accounts
For banking purposes, a Non-Resident Indian (NRI) is a person resident outside India who is a citizen of India. A Person of Indian Origin (PIO) is a foreign citizen with Indian roots, such as someone who was an Indian citizen earlier, or the child, grandchild or great-grandchild of an Indian citizen, or a foreign spouse of one. Overseas Citizen of India (OCI) cardholders living abroad are included. Citizens of Bangladesh and Pakistan are treated differently and need RBI approval.
Your status under FEMA depends on where you live and why, not just on the number of days you spend in India. Your status for income tax is worked out separately, under the Income-tax Act. The two can differ in the year you move, so keep both in mind.
NRE, NRO, FCNR at a glance
Here is the short version, taken from RBI’s comparison of the three accounts.
| Feature | NRE account | NRO account | FCNR (B) deposit |
|---|---|---|---|
| Who can open | NRIs and PIOs | Any person resident outside India | NRIs and PIOs |
| Currency | Indian rupees | Indian rupees | Freely convertible foreign currency |
| Account types | Savings, current, recurring, fixed | Savings, current, recurring, fixed | Term deposit only |
| Fixed deposit tenure | 1 to 3 years (banks may accept longer) | As for resident accounts, from 7 days | 1 to 5 years |
| Main source of money | Earnings sent from abroad | Income earned in India | Earnings sent from abroad |
| Repatriation | Freely repatriable | Current income, plus up to USD 1 million a year | Freely repatriable |
| Tax on interest (RBI FAQ) | Exempt | Taxable | Exempt |
The simple rule for NRE, NRO, FCNR accounts: money you earn abroad goes to NRE or FCNR. Money you earn in India, such as rent, dividends or pension, goes to NRO. Many NRIs keep one of each.
The NRE account: for money you earn abroad
The Non-Resident External (NRE) account is a rupee account for funds you bring in from outside India. Your salary from abroad is converted into rupees when it lands, and the balance, including interest, can be sent back abroad at any time without limit.
What can be credited: remittances from outside India, interest on the account, transfers from other NRE or FCNR accounts, and maturity proceeds of investments made from NRE money. What can be debited: local payments in India, remittances abroad, transfers to other NRE or FCNR accounts, and investments in India.
NRE fixed deposits run for at least one year; a bank may not offer an NRE term deposit for a shorter period. RBI also says interest on NRE and NRO deposits cannot be higher than the bank pays on comparable domestic deposits, and the extra rate for senior citizens does not apply to NRE or NRO deposits.
The catch is currency risk. Because the account is in rupees, if the rupee weakens against your home currency, the value of your NRE balance falls when you take it back. Our currency converter shows today’s rate.
The NRO account: for income you earn in India
The Non-Resident Ordinary (NRO) account is the home for income that arises in India: rent from a flat, dividends, pension, interest on old deposits, or the sale proceeds of property. It is also the account your existing resident savings account turns into when you move abroad.
What can be credited: remittances from abroad, legitimate dues in India and transfers from other NRO accounts. A resident relative can also gift or lend you rupees into your NRO account within the limits of the Liberalised Remittance Scheme. What can be debited: local payments, transfers to other NRO accounts and remittance of current income abroad.
How much you can take out of India
Current income such as rent or dividends can be sent abroad after tax. Beyond that, NRIs and PIOs can remit up to USD 1 million per financial year (April to March) from NRO balances, together with their other eligible assets, after paying applicable taxes. You can also move money from NRO to NRE within the same USD 1 million facility. The bank needs to see that applicable taxes have been paid before it sends the money.
NRO fixed deposits can be booked for as little as seven days, like resident deposits.
FCNR (B) deposits: no currency risk
A Foreign Currency Non-Resident (Bank) deposit lets you keep your savings in a foreign currency, such as US dollars or pounds, inside an Indian bank. It is only a fixed deposit, never a savings account, and the tenure is from one year to five years. No bank can accept an FCNR deposit for more than five years, and there is no recurring deposit option.
Because the deposit stays in foreign currency, you are not exposed to swings in the rupee. You get back the same dollars you put in, plus interest in dollars, and both are freely repatriable. RBI caps FCNR interest rates using benchmark rates in each currency, so these deposits usually pay less than rupee deposits; the trade is lower rate for no currency risk.
Breaking an FCNR deposit early can carry a penalty, and banks may recover their swap cost. Converting an NRE deposit into FCNR, or the other way round, before maturity also attracts a premature withdrawal penalty. You can compare maturity values with our NRI FD calculator.
How the interest is taxed
RBI’s FAQ is direct: income earned in NRE and FCNR accounts is exempt from income tax, and income in NRO accounts is taxable. In practice:
- NRE interest: tax-free in India while you qualify as a non-resident under FEMA.
- FCNR interest: tax-free while you are a non-resident, and tax practitioners point out that it stays tax-free while you are “resident but not ordinarily resident” after returning.
- NRO interest: taxable in India. Banks usually deduct tax at source at 30% plus cess and any surcharge for non-residents, far higher than the usual rate for residents. Even if your total Indian income is below the taxable limit, the bank still deducts this TDS, and you usually get it back by filing an Indian income tax return. Ask your bank or a tax adviser whether a lower rate can apply in your case.
Your country of residence may tax this interest under its own rules, even when India does not, so check there too.
Joint holding and nominees
Joint accounts are common, especially when parents in India help manage money. The rules differ:
- NRE and FCNR: can be held jointly by two or more NRIs or PIOs. You can also add a resident relative, but only on a “former or survivor” basis, and “relative” follows the definition in the Companies Act, 2013. While you are alive, the resident relative can operate the account only as your power of attorney holder.
- NRO: can be held jointly with other NRIs or PIOs, or with residents on a “former or survivor” basis.
“Former or survivor” means you, the NRI, operate the account during your lifetime, and the resident joint holder takes over only after your death. Always register a nominee as well.
Moving abroad, and coming back
When you become an NRI
RBI rules say that when a resident Indian becomes a person resident outside India, the existing resident account must be designated as an NRO account. Tell every bank where you hold accounts; the change is not automatic. Update your status on your investments too. Balances in an EEFC or RFC (Domestic) account can be credited to an NRE or FCNR account at your request.
When you return to India for good
- NRE: must be redesignated as a resident account, or the money moved to a Resident Foreign Currency (RFC) account if you are eligible, immediately on your return for employment or when your status changes. No penalty is charged for breaking an NRE deposit to move it to an RFC account.
- FCNR: can continue till maturity at the contracted rate if you wish. On maturity, the bank converts it into a resident rupee deposit or an RFC account. No penalty applies for premature conversion into an RFC account.
- NRO: can be redesignated as a resident account when you return with the intention of staying in India for an uncertain period.
Once you are back and resident again, interest on any NRE balance that has not been converted generally stops being tax-free, so do not delay the paperwork.
Choosing between NRE, NRO, FCNR: three examples
These are illustrations, not recommendations; your own mix depends on your plans.
- Priya, working in Singapore, sends money home every month and may return in a few years. An NRE savings account takes her salary transfers and pays her parents’ bills in rupees. An NRE fixed deposit of a year or more earns interest that is tax-free in India, and she can take it all back if she stays abroad.
- Rahul, settled in the US, owns a flat in Pune that earns rent. The rent must go into an NRO account. The bank deducts TDS on NRO interest, and he files an Indian return each year. When he wants the rent in dollars, he remits it as current income.
- Anita, in the UK, has savings in pounds and plans to retire there. An FCNR deposit in pounds keeps her money in the currency she will spend, so a weaker rupee does not hurt her.
Many families end up using all three. Think of NRE, NRO, FCNR as three pockets in one wallet: one for foreign earnings in rupees, one for Indian income and one for foreign currency savings. Keeping each kind of money in its own pocket keeps repatriation simple and your tax records clean.
Key takeaways
- Use NRE for money earned abroad, NRO for income earned in India and FCNR to avoid rupee risk.
- NRE and FCNR balances are freely repatriable; NRO allows current income plus up to USD 1 million a financial year.
- RBI says NRE and FCNR interest is exempt from income tax; NRO interest is taxable and carries higher TDS for non-residents.
- Resident relatives can be joint holders only on a former or survivor basis.
- Your resident account must become an NRO account when you move abroad; NRE must be redesignated immediately on your return.
This guide is general information, not personal tax or legal advice. FEMA and tax rules change, so check with your bank or a tax adviser before acting on large sums.