In plain words: every NRI faces the same confusion — NRE, NRO or FCNR? Each account does a different job, and choosing wrong causes repatriation and tax headaches. Here is how to pick.
NRE account (Non-Resident External)
- For your foreign earnings brought into India, held in rupees.
- Fully repatriable — principal and interest can go back abroad freely.
- Interest is generally tax-free in India.
- Best for income earned abroad that you want to keep movable.
NRO account (Non-Resident Ordinary)
- For your income arising in India — rent, dividends, pension, sale proceeds.
- Repatriation is capped — up to USD 1 million per financial year (with documentation), subject to taxes.
- Interest is taxable in India.
- Best for money earned in India.
FCNR(B) account (Foreign Currency Non-Resident)
- A term deposit held in foreign currency (USD, GBP, etc.) — so no rupee exchange risk.
- Fully repatriable, interest generally tax-free in India.
- Best to park foreign currency and avoid currency fluctuation.
How to choose
- Foreign income you want repatriable → NRE.
- Indian income (rent, dividends, sale proceeds) → NRO.
- Foreign currency you want to avoid converting → FCNR(B).
Many NRIs sensibly keep both an NRE and an NRO account — one for foreign money, one for Indian income.
Frequently asked questions
Which account is tax-free? NRE and FCNR interest is generally tax-free in India; NRO interest is taxable.
Where should my Indian rent go? Into an NRO account.
Can I repatriate from NRO? Yes — up to USD 1 million per financial year, with documentation.
How Vakil Help Desk helps
Vakil Help Desk advises on FEMA compliance, remittances, NRI matters, foreign investment and compounding — and represents clients in ED FEMA proceedings. If you have a cross-border transaction or a FEMA notice, we can help you get it right.
This article is for general legal awareness, not individual legal advice. FEMA rules, limits and forms are revised by the RBI and the Government from time to time, and the right treatment depends on your facts and the current position. Please consult a professional before acting on a cross-border transaction.