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NRI · FEMANRO vs NRE vs FCNR accounts: tax treatment and reporting
NRIs can hold three types of bank accounts in India – NRE, NRO and FCNR – each with different rules on deposits, repatriation and tax. Choosing the right one saves tax and paperwork. Here is a clear comparison.
Under the FEMA (Deposit) Regulations, NRIs and OCIs can hold NRE, NRO and FCNR(B) accounts in India. The income-tax treatment of interest is very different for each.
Comparison
| Feature | NRE | NRO | FCNR(B) |
|---|---|---|---|
| Currency | Indian rupees | Indian rupees | Foreign currency (USD, GBP, EUR etc.) |
| Source of deposits | Foreign earnings remitted; transfers from other NRE/FCNR | Indian income (rent, dividend, pension); foreign remittances also allowed | Foreign remittances |
| Account types | Savings, current, FD | Savings, current, FD | Term deposits (1–5 years) only |
| Repatriation | Fully repatriable (principal + interest) | Up to USD 1 million per FY (after tax) | Fully repatriable |
| Interest – income tax | Exempt while non-resident | Taxable | Exempt while non-resident / RNOR as per law |
| TDS | None | 30% + surcharge + cess (or DTAA rate) | None |
| Exchange risk | Yes (rupee) | Yes | No (held in foreign currency) |
| Joint holding | With other NRIs (resident relative as former/survivor in some cases) | With residents permitted | With other NRIs |
Worked example
Example: Priya, an NRI working in Dubai (no income tax there), has in FY 2025-26:
| Account | Balance | Interest | Tax treatment |
|---|---|---|---|
| NRE FD | ₹40,00,000 | ₹2,80,000 | Exempt |
| FCNR (USD) | USD 50,000 | Equivalent ₹1,90,000 | Exempt |
| NRO savings + FD (rent of flat in Rohini deposited) | ₹12,00,000 | ₹78,000 | Taxable; TDS 30% + cess |
| Rent received (NRO) | — | ₹3,60,000 a year | Taxable; tenant deducts TDS under 195 |
Her taxable Indian income: rent ₹3,60,000 – 30% standard deduction = ₹2,52,000 + NRO interest ₹78,000 = ₹3,30,000. Under the new regime the slab tax is nil (₹4 lakh exemption), and NRIs do not get the 87A rebate – but here income is under the basic exemption anyway. TDS deducted on rent and NRO interest (roughly ₹1.3 lakh) is refundable by filing ITR-2. Since India–UAE DTAA gives lower rates on interest (12.5% in many cases), she could have provided TRC and Form 10F to the bank to reduce TDS.
Repatriation from NRO
- Up to USD 1 million per financial year, covering balances, sale proceeds of property, inheritance etc.
- Requires Form 15CA (and 15CB certificate from a CA where the remittance is taxable and above ₹5 lakh).
- Bank may ask for proof of tax payment and source.
See Form 15CA and 15CB.
Returning NRIs
- On becoming FEMA resident, redesignate NRE/NRO savings as resident accounts; NRE FDs can run to maturity at contracted rate but interest becomes taxable once resident for tax purposes.
- FCNR deposits can continue till maturity; foreign currency balances can be moved to an RFC account.
- Plan around RNOR status – some foreign interest may remain outside the tax net for RNOR years.
Reporting in ITR
- NRE and FCNR interest: report as exempt income (if required by the form).
- NRO interest and rent: taxable income in ITR-2.
- Claim TDS credit from Form 26AS.
- Non-residents do not need Schedule FA.
Common mistakes
- Keeping a resident savings account after moving abroad (FEMA violation).
- Depositing Indian rent into NRE (not permitted).
- Not using DTAA rates on NRO interest.
- Forgetting to redesignate accounts on return.
Key takeaway
NRE and FCNR are for foreign earnings and give tax-free interest while non-resident; NRO is for Indian income and is taxable with 30% TDS (or DTAA rate). Our NRI services team helps NRIs structure accounts, claim DTAA rates and file returns.
Official references
Provisions discussed (summaries in our Law Library):
- FEMA, 1999 & rules – Section Deposit Regulations: NRE / NRO / FCNR accounts
Official sources to verify the current text, notifications and circulars:
Frequently asked questions
Is interest on an NRE account taxable?
No, interest on NRE deposits is exempt for a person who is a non-resident (or deemed not ordinarily resident, as provided) under income tax. Once the person becomes resident, the exemption stops.
What is the TDS on NRO interest?
TDS at 30% plus applicable surcharge and 4% cess under Section 195 (Section 393(2) of the 2025 Act), or the lower DTAA rate if the NRI furnishes TRC, Form 10F and other documents.
How much can be repatriated from an NRO account?
Up to USD 1 million per financial year (including sale proceeds of assets), after payment of taxes, with Form 15CA and, where applicable, Form 15CB.
What happens to NRE/FCNR deposits when an NRI returns to India?
Accounts must be redesignated as resident accounts or RFC (Resident Foreign Currency) accounts. FCNR deposits can continue till maturity; interest remains exempt while the person is RNOR, as per the law.
Can I transfer money from NRO to NRE?
Yes, within the USD 1 million annual limit, after tax compliance and with Form 15CA/15CB where applicable.
Is NRE interest reported in the Indian return?
It is exempt for non-residents; ITRs may ask for exempt income disclosure. It must be reported as taxable once you become resident.
Can a resident relative operate my NRO account?
Joint holding with a resident relative is allowed for NRO accounts on a former/survivor basis, and a power of attorney can permit operations.
This article is general information on the law as on 10 November 2026, written for educational purposes. It is not professional advice for your case. Section numbers under the Income-tax Act, 2025 should be confirmed with the official section mapping on the Income Tax Department website before use in filings.
Have a tax, GST or business question?
Call, WhatsApp or email CA Dilbagh Singh and team, from Delhi, anywhere in India or abroad.