The one rule that decides everything
The account rule is FEMA residence, not the label on your tax return. When you leave India for employment, business, vocation or another purpose showing an uncertain stay abroad, the resident account must be redesignated NRO. When you return to India to stay for an uncertain period, the reverse change is required, and for the return leg RBI's word is immediate. Either way, the bank is told as soon as the status changes, not at the next visit.
Income tax uses its own day-count tests, including the familiar 182-day starting point and exceptions. FEMA asks why and for how long you have left or returned. That is why someone can be FEMA-resident after returning to settle while still RNOR for income tax. Work out the tax side separately with the residential-status tool.
Every account type, side by side
The first table says who may hold each account and what it is built to receive. The second deals with sending money back abroad and Indian tax. The investment account is a route for listed shares, not a seventh deposit scheme.
| Account | Who may hold it | What money may go in |
|---|---|---|
| Resident savings | Person resident in India | Resident funds and permitted domestic credits |
| NRE | NRI or PIO/OCI resident outside India | Inward remittances, transfers from NRE/FCNR(B), NRO-to-NRE transfers within the USD 1 million route, and current income such as rent or dividends once tax is paid and the bank is satisfied |
| NRO | Person resident outside India | Legitimate Indian dues, inward remittances and permitted transfers |
| FCNR(B) | NRI or PIO/OCI resident outside India | Freely convertible foreign currency as a term deposit |
| RFC | A person resident in India with eligible foreign-currency funds, most often a returnee | NRE and FCNR(B) balances brought home, foreign earnings, gifts or inheritances received abroad (FEMA 10(R), regulation 4(B)) |
| SNRR | A person resident outside India, for permitted transactions with residents and bona fide dealings with other non-residents (widened in June 2026) | Rupee credits for those transactions; NRO-to-SNRR transfers now allowed |
| Designated investment account (the PIS route) | A person resident outside India buying listed shares on a repatriation basis; the route was widened beyond NRIs in the 2026 Budget | Funds through the designated repatriable account; non-repatriation investing runs through an ordinary NRO account, and old NRO(PIS) designations are redesignated NRO |
| Account | Can it be sent abroad? | Indian interest tax / TDS |
|---|---|---|
| Resident savings | Resident outward-remittance rules apply | Taxable; savings-account interest is outside bank TDS, time deposits are inside it (Section 393) |
| NRE | Freely repatriable | Exempt while the statutory FEMA condition is met |
| NRO | Current income freely; other balances up to USD 1 million a financial year (NRI and PIO holders) after tax compliance | Taxable; for a non-resident individual the bank deducts 30 percent plus 4 percent cess and any surcharge (Section 393(2), formerly 195), or the treaty rate once it holds your TRC and e-filed Form 41 and the treaty's conditions are met |
| FCNR(B) | Freely repatriable | Exempt while you are non-resident or RNOR for income tax (Schedule IV, serial 14); taxable once you are ordinarily resident, even if the deposit runs on |
| RFC | Freely repatriable under the scheme | Exempt while you are RNOR (Schedule IV, serial 14, formerly Section 10(15)(iv)(fa)); taxable once you are ordinarily resident |
| SNRR | Repatriable for the permitted transactions | Non-interest-bearing, so no account interest |
| Designated investment account | Follows the repatriable or non-repatriable route it is set up for | Gains and dividends follow the investment tax rules, not deposit-interest rules |
FCNR(B) is normally offered in USD, GBP, EUR, JPY, AUD and CAD for one to five years; banks publish the currencies and terms they offer. NRO's USD 1 million route is a financial-year cap, not a lifetime allowance.
What goes where: the money-to-account map
The source of a credit matters as much as your account status. Ask the bank before moving a mixed or unusual receipt.
| Money coming in or going out | Account | One form or limit to watch |
|---|---|---|
| Salary earned abroad | NRE; FCNR(B) after inward remittance if a term deposit suits | Inward-remittance trail |
| Rent from an Indian flat | NRO; or NRE once the tenant's TDS is paid and the bank accepts it as current income | The tenant's withholding certificate and your return |
| Sale proceeds of Indian property | NRO | Buyer withholding, tax records, then Forms 145/146 for an outward remittance where required |
| Indian dividends and interest | NRO; or NRE once tax is paid, as current income | TDS certificate and treaty documents if claiming a lower rate |
| Gift from a resident relative | NRO | Resident donor's LRS and bank documentation |
| Maturity of an old resident FD or PPF | NRO for the FD after status change; PPF proceeds to the linked permitted account | Existing PPF continues to its original maturity; do not assume an extension is available |
| Money sent from abroad to India | NRE or FCNR(B); NRO where the credit is a permitted NRO credit | Remittance advice / source trail |
| Money sent from India abroad | NRO for your eligible NRO balance | USD 1 million a financial year route, taxes and Forms 145/146 where applicable |
A credit can have a tax result even when it lands in the right account. The account fixes the FEMA route; it does not erase withholding, capital-gains tax or reporting.
The day you become an NRI: what happens to each account
Tell the bank as soon as your FEMA status changes; nothing in the rules gives a month's grace. The practical list is short:
1. Ask the bank to redesignate the resident savings account as NRO, or close it. 2. Have each resident FD converted into an NRO deposit; ask whether the contracted rate continues, because the regulation does not guarantee it. From then on the interest is a non-resident's NRO interest for tax. 3. Keep an existing PPF through its original maturity, but do not plan on extending it as an NRI. 4. Convert the resident demat and trading setup to the appropriate NRO/NRI form; use the NRE/PIS route only for eligible repatriable investing. 5. With a resident close relative on your NRE, NRO or FCNR(B) account, use former-or-survivor basis only. A mandate or power of attorney, not joint operation, is the day-to-day solution. 6. A resident account left running is a FEMA contravention and can lead to a KYC hold, wrong withholding and a compliance clean-up. See resident account still running after you became an NRI for the consequence and regularisation route.
The day you move back: what happens to each account
On a return to India for an uncertain stay, tell the bank promptly. NRE becomes a resident account or its eligible funds move to RFC; NRO becomes a resident account. The bank may allow an FCNR(B) deposit to continue to its contracted maturity if you ask; it then moves to RFC if you qualify, or to a resident rupee deposit.
The NRE exemption is tied to the FEMA condition in the tax law. It ends when that condition no longer applies, not at the end of the tax year. RNOR can protect qualifying foreign income under different rules, but it does not make an NRE account continue to meet its own exemption condition.
RFC is the place designed for eligible returning residents who want to retain foreign currency. The timing is therefore: establish the FEMA return date, redesignate the rupee accounts, decide whether to move eligible NRE money to RFC, then ask the bank whether any FCNR(B) deposit may run to maturity. The full sequence is in redesignating your accounts when you return.
Where the mess actually comes from
1. The resident account keeps running. It can be flagged on re-KYC, tax is handled on the wrong footing and the account needs regularising. Fix it by documenting the FEMA change date and redesignating it.
2. NRE interest is called taxable, or NRO interest exempt. The first can create an unnecessary return; the second leaves a tax gap. Fix it by checking the account type and the holder's status for each interest certificate.
3. A non-resident files the no-deduction declaration. Form 121 (from FY 2026-27, replacing 15G and 15H; Section 393(6), formerly 197A) is for income-tax residents only. A bank that accepts one from a non-resident has applied the wrong rule, and the shortfall surfaces later. The right route is the tax residency certificate and an e-filed Form 41 for the treaty rate at source, or a return and refund claim.
4. A resident joint holder is put in the wrong mode. That can prevent the bank from accepting the mandate and defeats the intended survivor arrangement. Fix it with former-or-survivor for the NRI's NRE/NRO/FCNR(B) account, or a mandate for daily help.
5. Property-sale money sits in NRO and is called stuck. It is usually waiting for tax evidence and the remittance process, including Forms 145/146 where required. Gather the sale, tax and source papers before requesting the transfer.
6. A returning NRI keeps NRE open after landing. That leaves a FEMA mismatch and can cause taxable interest to be treated as exempt. Redesignate it or move eligible funds to RFC when the return is for an uncertain stay.
A worked example
Priya leaves Pune for a Dubai job in 2024. She has a resident savings account, a ₹10 lakh resident FD, a PPF and a resident demat. That month she gives the bank her new status, redesignates savings to NRO, asks for the FD's NRO treatment, keeps the existing PPF to its original maturity and converts the demat to the NRI route. Her Dubai salary is remitted to a new NRE account; if she wants to keep dollars rather than rupees, she uses an FCNR(B) deposit.
In 2028 Priya returns to Pune to settle. Her NRO and NRE accounts are redesignated to resident accounts, unless she moves eligible NRE funds to RFC. The bank may let a running FCNR(B) deposit remain to maturity if she asks. Her ₹60,000 of NRE interest earned after the FEMA return date is no longer covered by the NRE exemption, even if she is RNOR for income tax.
The deposit that used to be her NRO FD, now a resident deposit, produces ₹70,000 interest in her first year back. She is an Indian tax resident again, RNOR or not, so the bank deducts resident TDS of 10 percent, ₹7,000, with her PAN on file (Section 393(1)); the UAE treaty is no longer hers to claim. Had the same ₹70,000 arisen a year earlier, while she was still a non-resident, the bank would have deducted 30 percent plus cess, ₹21,840, unless it held her TRC and e-filed Form 41 and she met the treaty's conditions, in which case the UAE rate of 12.5 percent, ₹8,750, would have applied. She reconciles the Form 131 (formerly 16A) certificate with the return. The figures teach the split: ₹60,000 turns on the return date and account status; ₹70,000 turns on whether she is a resident or a non-resident for income tax when the interest is credited. The scenario applies the law as it stands in September 2026.