NRE vs NRO vs FCNR: which account for your India money?

If you are an NRI with money in India, you need to understand three account types: NRE, NRO, and FCNR. Each has different rules for deposits, withdrawals, taxation, and repatriation. Choosing the wrong account can cost you in taxes or lock your money.

The quick summary

NRE account (Non-Resident External)

This is the most common account for NRIs who send money home from the US. When you transfer USD to India via Wise, Remitly, or any provider, the money typically lands in an NRE account where it is converted to INR.

Key advantages:

• Interest is tax-free in India. Both savings and fixed deposit interest in NRE accounts are exempt from Indian income tax.
• Fully repatriable. You can move the money back to the US at any time without restrictions.
• Joint account allowed with another NRI (not a resident Indian).

Limitations:

• Can only be funded with foreign income. You cannot deposit Indian income (rental income, dividends from Indian stocks) into an NRE account.
• If you return to India permanently, NRE accounts must be converted to resident accounts or RFC (Resident Foreign Currency) accounts.

NRO account (Non-Resident Ordinary)

Use this for income earned in India. If you have rental income from Indian property, dividends from Indian investments, or any other India-sourced income, it goes into an NRO account.

Key differences from NRE:

• Interest is taxed at 30% in India (plus cess and surcharge). This is the biggest difference from NRE.
• Limited repatriation: You can repatriate up to $1 million per financial year from an NRO account, subject to tax clearance and documentation.
• Can accept both Indian and foreign income. This makes it more flexible for deposits, but less tax-efficient.

FCNR account (Foreign Currency Non-Resident)

FCNR lets you hold money in foreign currency (USD, GBP, EUR, etc.) in India. This eliminates exchange rate risk — your money stays in dollars until you need it.

• Interest is tax-free in India (like NRE)
• Fully repatriable (like NRE)
• Only term deposits — no savings account option. Minimum 1 year, maximum 5 years.
• No FX risk: If you deposit $10,000 in an FCNR account, you get $10,000 + interest back in dollars. The rupee exchange rate does not affect your principal.

FCNR is best for NRIs who want to park money in India temporarily without taking on currency risk. Interest rates are lower than NRE FDs but the principal is protected from INR depreciation.

Which account should you use?

For most NRIs who send money to India regularly:

• Monthly support to family: NRE savings account. Tax-free, fully repatriable, and your family can access it easily.
• Rental income from India: NRO account. Required by regulation for India-sourced income.
• Parking savings in India: NRE FD for higher rates in rupees, or FCNR FD if you want to avoid exchange rate risk.
• Planning to return to India: FCNR to protect your savings from rupee fluctuation until you are ready to convert.

U.S. tax implications

Regardless of which account type you use in India, as a U.S. person you must:

• Report the interest income on your U.S. tax return (even if it is tax-free in India)
• File an FBAR if combined foreign accounts exceed $10,000 at any point. See our FBAR guide →
• File Form 8938 (FATCA) if total foreign assets exceed $50,000 (single) or $100,000 (married)
• Claim foreign tax credit for tax paid on NRO interest to avoid double taxation

This is educational content, not tax or legal advice. Banking regulations may change. Consult your bank and a qualified tax professional for your specific situation.