Quick answer: If you earn abroad and want tax-free returns — open an NRE account. If you have income in India (rent, dividends, pension) — you need an NRO account. Most NRIs with both income types should have both.
What Is an NRE Account?
A Non-Resident External (NRE) account lets you park your foreign earnings in India in Indian Rupees. The key benefits are hard to beat:
- Tax-free interest — interest earned is completely exempt from Indian income tax
- Fully repatriable — you can move both principal and interest back abroad at any time
- Rupee account — you convert your foreign currency to INR at the time of deposit, so you take the exchange rate risk
- Available as savings accounts and fixed deposits (FDs)
Best for: Parking overseas salary savings you might want to bring back one day, or investing in Indian markets via SIP/mutual funds from a clean, tax-free account.
What Is an NRO Account?
A Non-Resident Ordinary (NRO) account is designed for income that originates in India — rent from a property, dividends from Indian stocks, pension payments, or money gifted by Indian residents.
- Interest is taxable — TDS of 30% is deducted at source (can be reduced via DTAA)
- Repatriation limit — you can repatriate up to USD 1 million per financial year after paying tax
- You cannot freely move money from NRO to an overseas account without satisfying FEMA conditions
Side-by-Side Comparison
| Feature | NRE Account | NRO Account |
|---|---|---|
| Purpose | Foreign earnings in India | India-sourced income |
| Tax on Interest | Nil (fully exempt) | 30% TDS |
| Repatriation | Freely repatriable | Up to $1M/yr after tax |
| Joint account | With another NRI only | With NRI or resident Indian |
| Currency | INR (converted from forex) | INR |
| Deposits from India | Not allowed | Allowed |
What About FCNR Accounts?
There's a third option: Foreign Currency Non-Resident (FCNR) deposits. These are fixed deposits held in your home currency (USD, AED, GBP, EUR, etc.) — so you eliminate exchange rate risk entirely. Interest is tax-free. Great for large sums you don't want to convert to INR yet.
Common Mistakes NRIs Make
- Keeping a regular savings account after becoming NRI — illegal under FEMA. Must convert to NRO within 6 months of becoming NRI.
- Mixing foreign and India income in one account — defeats the purpose and creates tax complexity.
- Not claiming DTAA benefit on NRO interest — you can reduce TDS from 30% to 10–15% in many countries.
Action checklist: 1) Open NRE account for your overseas salary · 2) Convert your old Indian savings account to NRO · 3) Check DTAA with your country of residence to reduce NRO TDS · 4) Consider FCNR FD for amounts above ₹20L you won't touch for 1–5 years
Compare NRE FD Rates Across Banks
See which bank offers the best NRE fixed deposit rate right now