Updated for the Income-tax Act, 2025 · Tax year 2026-27 (1 April 2026 – 31 March 2027)

NRE vs NRO accounts: how each is taxed

Interest on one is tax-free, the other faces 31.2% TDS. Here's how NRE, NRO and FCNR accounts compare.

By NRI Tax Calculator editorial team · Updated

Key points

  • NRE interest is tax-free in India; NRO interest is taxable with 31.2% TDS.
  • Indian income such as rent must go into NRO. Foreign earnings can go into NRE.
  • NRE money is freely repatriable. NRO is limited to USD 1 million a financial year.
  • Tax-free in India doesn't mean tax-free at home. Report NRE interest where you live.

Once you become an NRI under FEMA, you have to convert your resident savings accounts and open NRI accounts. The two main types, NRE (Non-Resident External) and NRO (Non-Resident Ordinary), are taxed very differently.

NRE vs NRO at a glance

NRE accountNRO account
What goes inMoney earned abroadMoney earned in India (rent, dividends, pension, sale proceeds) and foreign money
Interest taxed in India?No, tax-free while you're an NRIYes, at your slab rate
TDS on interestNone31.2% (or treaty rate with TRC + Form 10F)
Repatriation abroadFully and freely repatriableUp to USD 1 million per financial year, with Forms 145/146
Currency riskHeld in rupeesHeld in rupees
Joint holderAnother NRI (resident only as "former or survivor")Resident or NRI

FCNR(B): the third option

FCNR(B) deposits are fixed deposits held in foreign currency (USD, GBP, EUR and others). Interest is tax-free in India while you're an NRI, and stays tax-free while you're RNOR after returning. Because the deposit stays in foreign currency, you avoid rupee depreciation, though interest rates are lower than on rupee deposits.

Which account should you use?

  • Savings sent from abroad: NRE (or FCNR if you want to avoid currency risk). The interest is tax-free and the money can go back any time.
  • Indian income like rent, dividends and pension: this must go into NRO. You can't deposit Indian income into NRE.
  • Property sale proceeds: credited to NRO, then repatriated within the USD 1 million limit. Sale money from property originally bought with NRE or foreign funds can have special repatriation rules. See our repatriation guide.

Watch out for these traps

  • Home-country tax: the US, UK, Canada and Australia tax residents on worldwide income, including NRE interest that's tax-free in India. Report it.
  • Returning to India: when you become resident under FEMA, NRE accounts must be redesignated. NRE interest exemption is linked to non-resident status, so don't keep earning "tax-free" interest after you return.
  • Old resident accounts: keeping a regular savings account after becoming an NRI breaches FEMA. Convert it to NRO.

Estimate the tax on your interest with our NRO interest and DTAA calculator.

Try the calculator

NRO Interest & DTAA CalculatorTax and TDS on NRO, NRE and FCNR interest

Frequently asked questions

Is NRE interest taxable in India?
No. Interest on NRE accounts is exempt from Indian tax while you're a non-resident. It may be taxable in your country of residence.
Can I transfer money from NRO to NRE?
Yes, within the USD 1 million per financial year limit, after paying any tax due and with Forms 145/146 where required.
Can I deposit rent into an NRE account?
No. Rent and other income earned in India must be credited to an NRO account.
What happens to my NRE account when I return to India?
It must be redesignated as a resident account or moved to an RFC account once you become resident under FEMA. Interest after that point is taxable.
Selling property or owed a refund?

A chartered accountant who works with NRIs can get a lower-TDS certificate, file your return and handle repatriation paperwork.

Sources

This guide is general information based on the law as at 25 October 2026, not tax or legal advice.