Finance · Free tool
NRE vs NRO Account
NRE = your foreign earnings parked in India (tax-free, fully repatriable). NRO = your Indian-source income (rent, dividends, etc., taxable, limited repatriation up to USD 1M/yr). Most NRIs need both.
| Aspect | NRE | NRO |
|---|---|---|
| Source of funds | Foreign income (salary abroad, etc.) | Indian income (rent, dividend, pension) |
| Tax on interest | Tax-free in India | Taxable at slab — 30% TDS for non-residents |
| Repatriation | Fully and freely repatriable | Up to USD 1 million per FY (with Form 15CA/CB) |
| Joint holder | Only with another NRI / OCI | NRI + Indian resident (close relative) allowed |
| Currency | Maintained in INR; deposits in foreign currency converted at receipt | INR only |
| Conversion to resident | Must be redesignated as resident account on returning to India | Same — redesignate as resident savings |
| Best use case | Park overseas earnings, invest in MFs, repatriate easily | Receive Indian income, manage local payments |
Quick decision
Most NRIs need both: NRE for parking foreign salary tax-free, NRO for receiving rent / dividends. Pair the NRE with an NRE FD for higher tax-free returns. Pair the NRO with an FCNR(B) deposit if you want to hedge currency risk.
The core difference
Both NRE (Non-Resident External) and NRO (Non-Resident Ordinary) are rupee accounts an NRI / PIO / OCI is allowed to open in India under FEMA. The split is by source of funds: NRE holds money you remit in from abroad (USD, GBP, AED converted at landing); NRO holds India-source income like rent, dividends, pension or maturity proceeds. NRE interest is tax-free in India and fully repatriable; NRO interest is taxable at 30% (plus surcharge / cess) with TDS deducted at source, and repatriation is capped at USD 1 million per FY with CA Form 15CA/CB certification.
Worked example
A Dubai-based NRI earning AED 25,000/month sends ₹3 lakh home monthly → goes into NRE at SBI's 7.1% rate. Annual interest ~₹1.27 lakh, fully tax-free in India and freely transferable back to UAE. The same person also collects ₹40,000/month rent from a Mumbai flat → goes into NRO. The bank deducts 30% TDS on the rent (and on NRO interest); the NRI claims a refund or DTAA relief at ITR-filing time. Joint holder rules: NRE allows joint with another NRI only; NRO allows joint with a resident relative on “former or survivor” basis.
When to use which
- NRE: your salary abroad, sending money home for parents, family investments via SIP
- NRO: India-source rent, dividends, pension, property sale proceeds, EPF / PPF maturity
- Both: most NRIs need both — NRE for inbound remittance, NRO for India income management
- FCNR(B): add this third account if you want USD / GBP / EUR deposits with no INR exchange-rate risk
To confirm whether you legally qualify as NRI this year, use the NRI residency rule (Section 6) tool first; for selling Indian property as an NRI see NRI property sale tax.
FAQ
Can I deposit my Indian salary into NRE?
No. NRE accepts only foreign earnings (transferred from abroad). Indian-source income (salary, rent, interest) goes to NRO.
Is NRE FD interest tax-free forever?
As long as you remain non-resident. The day you become "Resident" (180+ days in India in a FY), the NRE FD must be redesignated as resident — and interest becomes taxable from that date.
What is FCNR(B)?
A foreign-currency deposit (USD, GBP, EUR) — interest tax-free, principal in foreign currency so no exchange-rate risk on maturity. Useful if you might repatriate.