The one rule that picks your account
Forget the acronyms for a second. There is a single rule:
NRE is for money you earn abroad and bring to India. Your foreign salary. It sits in rupees and the interest is tax-free in India.
NRO is for money you earn in India: rent, dividends, a pension, the proceeds of selling an Indian asset. It sits in rupees and the interest is taxed.
FCNR is for money you earn abroad that you want to keep in the original currency, dollars, pounds, euros, so a falling rupee can't eat into it. It is a fixed deposit, tax-free in India.
That's it. Where the money came from tells you which account it belongs in.
FCNR vs NRE vs NRO, side by side
| NRE | NRO | FCNR | |
|---|---|---|---|
| Holds | Foreign income brought to India | Income you earn in India | Foreign income kept in foreign currency |
| Currency | Indian rupees | Indian rupees | US$, £, €, etc. |
| Interest taxed in India? | No, tax-free | Yes, 30% TDS | No, tax-free |
| Bring money back abroad | Fully, anytime | Up to USD 1 million a year | Fully, anytime |
| Rupee risk | Yes | Yes | No |
| Best for | Your salary abroad | Indian rent, dividends, pension | Foreign currency you don't want exposed to the rupee |
Most NRIs end up holding two: an NRE (or FCNR) for the money they bring from abroad, and an NRO for whatever they still earn in India.
Which interest is tax-free: and which isn't
NRE and FCNR interest is tax-free in India. NRE interest is exempt under Section 10(4)(ii) and FCNR interest under Section 10(15)(iv)(fa), and no TDS is deducted. (If you live in a country that taxes worldwide income, like the US or UK, you still declare it there. It's only India that exempts it.)
NRO interest is taxed. The bank deducts 30% TDS under Section 195 (renumbered Section 393 in the Income-tax Act 2025), plus cess. The good news: a tax treaty usually cuts that to 10-15%. File Form 41 (the old Form 10F) with your Tax Residency Certificate and the bank applies the lower rate; anything over-deducted comes back when you file your return.
Bringing your money back abroad
From NRE and FCNR: everything, anytime. Both the money and the interest are fully repatriable with no annual cap. This is the whole point of these accounts.
From NRO: up to USD 1 million per financial year. Because NRO holds Indian-source money, RBI caps how much leaves the country at one million US dollars a year. Each transfer needs a Form 15CA declaration and, above ₹5 lakh, a Chartered Accountant's Form 15CB certificate (renumbered Forms 145 and 146 from April 2026). The CA certificate is the one step you can't self-file.
Checklist: the day you become an NRI
The most common mistake is doing nothing and quietly keeping a resident account, which is actually against the rules. Here's the clean version:
| When you become an NRI | What to do |
|---|---|
| Your old resident savings account | Convert it to an NRO account, by law you cannot keep a resident account once you're an NRI |
| Your salary abroad | Open an NRE account for it (and an FCNR deposit if you want to hold it in dollars/pounds) |
| Indian rent, dividends, pension | Route them into the NRO account |
| Resident FDs, mutual funds, demat | Re-designate them to NRI status |
| Each bank | Refresh your KYC and FATCA/CRS details with the new status |
Checklist: the day you move back to India
Moving home reverses most of the above, and there's one account built just for returnees, the RFC (Resident Foreign Currency) account, which lets you keep money in foreign currency after you're a resident again.
| When you move back | What to do |
|---|---|
| NRE and NRO accounts | Re-designate them to resident accounts |
| Foreign currency you want to keep | Move it into an RFC (Resident Foreign Currency) account |
| A running FCNR deposit | Let it run to maturity, then move it to RFC or a resident account |
| NRE interest | It stops being tax-free the day you're a resident again, plan around your RNOR years, when foreign income is still exempt |
| KYC, demat, mutual funds | Update everything back to resident status |
The two exemptions run on different clocks, and that decides where your money should sit. The NRE exemption is written on your FEMA status: Section 10(4)(ii) covers a person resident outside India, and FEMA turns on why you're in India, not only how long. Come back for good and your bank treats you as resident from arrival, which is why it asks you to redesignate the account. So NRE interest can stop being exempt straight away, while you're still RNOR for income tax.
The foreign-currency exemption is written differently. Section 10(15)(iv)(fa) covers a foreign-currency deposit with a scheduled bank held by a non-resident or a person not ordinarily resident, so it survives your whole RNOR window. That covers both a running FCNR deposit and an RFC account. Which is why a running FCNR deposit is worth letting mature, and why NRE money you want to keep tax-free is better moved into RFC than into a resident rupee account.