If you earn abroad but still have roots, and rupees, in India, choosing the right NRI banking setup can feel… complicated. Should you park salary abroad in an NRE account, collect rent in an NRO account, or lock FX savings in a FCNR deposit to avoid rupee risk? And what about repatriation, TDS, DTAA, and FEMA rules?
Take a deep breath. This Paisaseekho guide lays out NRE vs NRO vs FCNR with zero jargon, clear tables, practical scenarios, and 2025-ready tax and RBI rules so you can move money legally, efficiently, and tax-smart.
- NRE (Non-Resident External): Hold your foreign income in India, fully repatriable, interest exempt from Indian tax while you’re NRI.
- NRO (Non-Resident Ordinary): Manage your Indian income (rent, dividends, pension). Interest is taxable in India, outward remittance of current income is free, but principal remittance is generally capped at USD 1 million per FY with documentation.
- FCNR(B) (Foreign Currency Non-Resident): A term deposit in foreign currency (USD/EUR/GBP etc.), shields you from INR volatility; funds are repatriable and interest is exempt in India while NRI/RNOR.
We’ll help you decide where each rupee, or dollar, belongs.
Who Can Open These Accounts?
You must qualify as a Non-Resident under FEMA/Income-tax rules. (Beware: if your status changes to resident, tax benefits can change immediately.) i
- NRE: For NRIs to hold foreign-source funds in INR in India.
- NRO: For NRIs to collect Indian-source income (rent, interest on Indian FDs, dividends, business income).
- FCNR(B): For NRIs to place foreign currency term deposits with Indian banks (tenor typically 1–5 years).
NRE vs NRO vs FNCR Account: The One-Glance Comparison (2025)
| Feature | NRE Account | NRO Account | FCNR(B) Deposit |
| Currency you hold | INR | INR | Foreign currency (USD/EUR/GBP, etc.) |
| What money goes in | Foreign income/remittances | Indian income (rent, dividends, pension, etc.) | Foreign currency remittance/transfer from NRE |
| Repatriation (principal & interest) | Full & free repatriation | Current income freely repatriable; principal up to USD 1 mn/FY with forms/taxes | Full & free repatriation |
| Indian taxation on interest (while NRI) | Exempt u/s 10(4)(ii) | Taxable in India; TDS applies | Exempt u/s 10(15)(iv)(fa)/10(4) while NRI/RNOR |
| Tenor | Savings/current/term deposit | Savings/current/term deposit | Term deposit only (typically 1–5 yrs) |
| FX risk | Exposed to INR (you hold rupees) | Exposed to INR | Hedged (you hold foreign currency) |
| Typical use | Parking overseas earnings in India; transfers back anytime | Collecting & paying Indian expenses; compliant remittance of Indian income | Parking FX savings to earn interest without INR risk |
Sources for this NRE vs NRO vs FCNR Account comparison: RBI & Income-tax resources.
NRE vs NRO vs FCNR Account Deep Dive: Each Account, Simplified
1) NRE Account , “Bring Money From Abroad, Keep It Flexible”
Best for: Salary/business earnings you receive outside India but want to park/invest in India in INR.
Why NRIs love it:
- No Indian tax on interest while you’re NRI; balances freely movable back abroad.
- Use INR locally (bills, investments), yet pull out dollars later when needed.
Good habits:
- Credit only foreign-source funds. If you credit Indian rent/dividends here, you may breach FEMA intent, route such income to NRO instead.
- For higher returns in INR, you can do NRE FDs; still fully repatriable and interest remains exempt while non-resident.
When status changes to Resident: interest exemption stops; convert/close as per bank/RBI instructions (e.g., move to resident/RFC as applicable).
2) NRO Account , “Handle Indian-Source Money, Pay Indian Taxes, Then Remit”
Best for: Rent, dividends, pension, Indian FDs, or sale proceeds from Indian assets.
Key rules:
- Interest is taxable in India with TDS; you can claim DTAA relief/refund in your ITR.
- Repatriation: All current income is freely repatriable; capital (e.g., sale proceeds) generally up to USD 1 million per financial year (April–March) with supporting documents & tax compliance.
Why it matters: NRO is your compliance rail for Indian income, keep it separate from foreign earnings to avoid headaches.
3) FCNR(B) Deposits , “Sleep Easy, No Rupee Risk”
Best for: You have USD/EUR/GBP savings and want India bank safety with no INR currency risk.
What you get:
- Deposit stays in foreign currency; principal + interest fully repatriable.
- Interest is exempt from Indian tax while you are NRI (and typically RNOR); tax may apply once you become Resident (then consider RFC).
- Typical tenors 1–5 years. RBI periodically tweaks deposit rate ceilings, in late 2024 RBI allowed higher FCNR(B) rate caps to attract forex inflows.
Useful nuance: If your residential status changes while a FCNR(B) is running, you may hold until maturity at the contracted rate, then convert to Resident/RFC as per rules.
Choosing Smartly: Simple Decision Paths
Q1: Where does the money originate?
- Foreign income/savings → NRE (INR) or FCNR(B) (foreign currency).
- Indian income → NRO.
Q2: Do you need rupees now or want to avoid INR risk?
- Need INR liquidity for India expenses/investments → NRE.
- Want to stay in USD/EUR/GBP without INR swings → FCNR(B).
Q3: Will you remit out regularly?
- NRE/FCNR: No limit.
- NRO: Current income free; principal typically up to USD 1 mn/FY with documentation & taxes.
Q4: Tax positioning (India):
- NRE interest: Exempt u/s 10(4)(ii) while NRI.
- NRO interest: Taxable in India (TDS applies).
- FCNR(B) interest: Exempt while NRI/RNOR (Income-tax Act provisions, incl. 10(15)(iv)(fa)), then taxable once resident.
Common Real-Life Scenarios (What To Use, Why)
Scenario A , Working in Dubai; parents rent out your flat in Pune
- Your salary (AED) → Remit to NRE (for INR use or NRE FD).
- Pune rent → Credit to NRO (pay Indian bills/taxes from here).
- Repatriate rent after tax via NRO; current income is freely repatriable; principal remittance subject to USD 1 mn/FY limit/documentation.
Scenario B , US tech professional with USD savings; worried about INR volatility
- Place part of USD stash in FCNR(B) for 1–3 years: no INR risk; interest exempt in India while NRI. RBI has, at times, raised FCNR(B) rate caps to attract deposits, check your bank’s latest quotes.
- Keep monthly India expenses in NRE, move as needed.
Scenario C , Canada move next year; property sale planned now
- Sale proceeds (capital) will land in NRO; after paying applicable Indian taxes, you can remit up to USD 1 million in that FY out of NRO with forms & CA certificate.
- Meanwhile, current income (rent, interest) is freely repatriable.
Scenario D , Returning to India in 18 months (status to Resident)
- Continue FCNR(B) till maturity at contracted rate; on maturity, bank will shift to Resident/RFC per your choice. NRE/NRO will be redesignated to resident variants as per rules.
Taxes & Compliance: What Actually Changes Your Outcome
1) Residential status drives tax benefits
- Interest on NRE/FCNR(B) is exempt while you’re NRI (and typically RNOR for FCNR, per provisions). If you become Resident, exemption can stop from that year; plan ahead.
2) NRO has Indian tax + TDS
- Interest in NRO is taxable in India; banks deduct TDS at source. You can claim DTAA relief/refund in your ITR based on residency & treaty. (Exact rates vary; rely on your CA/treaty article.)
3) Repatriation paperwork (NRO)
- For current income (rent, dividends) , free repatriation against proofs. For principal/capital , up to USD 1 mn/FY with Form 15CA/CB and documentation.
4) Source discipline
- Keep foreign-source funds in NRE/FCNR; keep Indian-source receipts in NRO. This alignment keeps you FEMA-compliant and audit-ready.
Interest Rates & FX Risk: What Should You Expect?
- NRE FDs usually quote INR rates; attractive when rupee rates are high, but you carry INR currency risk if you later remit back as USD/EUR.
- FCNR(B) pays in foreign currency; historically, the headline rate can be lower than NRE FD, but you avoid INR depreciation risk. RBI may allow higher FCNR(B) rate ceilings at times (e.g., Dec 2024) to boost forex inflows, shop around; large banks publish monthly cards.
Documentation & Opening Flow (Typical)
- KYC (passport, valid visa/work permit, overseas address proof).
- FATCA/CRS declarations for global tax reporting.
- Initial funding from overseas account (for NRE/FCNR).
- For NRO, proofs for Indian income streams (rent agreement, 26AS, bank credit details) help with repatriation later.
- Digital onboarding is widespread; major banks publish product pages and RBI-aligned FAQs.
Pro Tips to Optimise Your NRI Banking in 2025
- Split your flows: Foreign salary → NRE; Indian income → NRO; long-term FX parking → FCNR(B).
- Plan taxes early: Use DTAA where eligible; file Indian ITR if you have taxable NRO income.
- Don’t mix sources: It complicates FEMA and tax proofs. Keep a clean trail.
- Use FCNR(B) tactically: If you foresee INR weakness or need USD/EUR later, FCNR helps preserve FX value.
- Think status changes: If you’re likely to return to India soon, ask your bank about post-maturity movement to RFC or resident accounts, and the tax flipover.
- Keep documents ready for NRO outward remittances (CA certificate, proofs, forms). Banks are strict, start paperwork early.
Example: A Clean, Compliant Money Map
Profile: Aditi (NRI in Singapore), owns a flat in Bengaluru, USD savings, parents in India.
- Salary in SGD → Periodic remittance to NRE; invest in NRE FD or mutual funds (as permitted). Interest on NRE FD exempt in India while NRI.
- Bengaluru rent → NRO; pay Indian taxes from NRO; remit leftover rent back to SG, current income is freely repatriable. For capital receipts (e.g., if she sells the flat), use the USD 1 mn/FY window with CA docs.
- USD savings → Place a chunk in FCNR(B) for 2 years; interest tax-exempt in India while NRI; no INR risk.
Result: Tax-aware, FEMA-clean, and flexible.
NRE vs NRO vs FCNR(B): When to Use Which (Quick Matrix)
- I get paid in foreign currency → NRE (INR use) or FCNR(B) (stay in FX).
- I earn rent/dividends in India → NRO.
- I need to remit out regularly → NRE/FCNR(B) (no limit). NRO for current income (free) and capital (up to USD 1 mn/FY).
- I’m worried about INR depreciation → FCNR(B).
- I want higher INR returns and can take INR risk → NRE FD.
Final Takeaways (Bookmark This)
- NRE = Foreign income → INR in India, tax-free interest (India) while NRI, unlimited repatriation.
- NRO = Indian income → INR, taxable interest in India; current income freely repatriable; capital up to USD 1 mn/FY with compliance.
- FCNR(B) = FX term deposit (1–5 yrs), no INR risk, tax-exempt interest (India) while NRI/RNOR, fully repatriable.
Pick the account based on the source of funds and your currency risk, that single choice gets you 80% of the way there. For the rest (rates, paperwork, DTAA), a quick chat with your bank/CA saves hours later.
FAQs
1) Which is better: NRE or NRO account?
They serve different purposes. Use NRE for foreign-source funds (salary/business abroad) that you may want to repatriate freely; interest is tax-exempt in India while NRI. Use NRO to collect Indian-source income, interest is taxable in India and repatriation of current income is free while principal/capital is typically allowed up to USD 1 million per financial year with documentation. Most NRIs need both.
2) Is NRE interest tax-free in India in 2025?
Yes, interest on NRE balances/FDs is exempt from Indian income tax while you are NRI under Section 10(4)(ii). If your residential status changes (e.g., you become resident), exemption can cease for that year. Always track status under FEMA/Income-tax and inform your bank.
3) What are FCNR(B) deposits and why choose them over NRE FDs?
FCNR(B) are foreign-currency term deposits (USD/EUR/GBP etc.) with Indian banks for 1–5 years. They eliminate INR currency risk because both principal and interest remain in FX; both are freely repatriable and interest is exempt in India while NRI/RNOR. Choose FCNR(B) when you want FX safety; choose NRE FDs when you prefer INR rates and are comfortable with INR movement.
4) How much can I remit from my NRO account?
Your current income (rent, dividends, interest) is freely repatriable against proofs. For capital (e.g., property sale proceeds), RBI permits outward remittance up to USD 1 million per financial year per NRI, subject to tax compliance and documentation (e.g., Form 15CA/CB). Start paperwork early to avoid delays.
5) Are FCNR(B) interest rates attractive in 2025?
RBI has, at times, raised the interest-rate ceiling on FCNR(B) to attract forex inflows (e.g., Dec 2024), allowing banks to offer more competitive rates. Actual rates vary by bank, currency, and tenor, compare rate cards before booking. Remember, the big advantage is no INR risk.
6) I’m planning to return to India. What happens to my NRE/NRO/FCNR(B)?
- NRE/NRO will be re-designated to resident variants as per bank policy and rules.
- FCNR(B) can typically run till maturity at the contracted rate; on maturity, funds move to a Resident or RFC account (if eligible), at your option. Inform your bank when status changes.
7) Can I use NRE to deposit Indian rents or business receipts?
No, route Indian-source income to NRO. NRE is meant for foreign-source funds. Mixing sources risks FEMA non-compliance and complicates tax proofs. After paying taxes, you can remit from NRO under the relevant rules.
8) Is FCNR(B) interest always tax-free?
In India, while you are NRI (and typically RNOR), FCNR(B) interest is exempt under the Income-tax Act provisions (including 10(15)(iv)(fa)). Once you become a Resident, Indian tax can apply. Your country of residence may still tax global income, use DTAA/tax advice.
Disclaimer
This article is for education only. Banking/tax rules evolve; always verify with your bank, RBI circulars, and a qualified tax professional for your situation.
