Moment guide · FY 2026-27

I am choosing between NRE, NRO and FCNR accounts

What is the difference between NRE, NRO and FCNR accounts for tax?

NRE accounts hold foreign income, are fully repatriable and earn tax-free interest while you are an NRI or RNOR. NRO accounts hold Indian income, have restricted repatriation and their interest is taxed at 30% with TDS. FCNR accounts are foreign-currency deposits with tax-free interest for NRIs. Convert resident accounts within 6 months of becoming an NRI.

The #1 trap

Leaving Indian income in a resident savings account after becoming an NRI — the account must be converted to NRO/NRE within 6 months under FEMA, and NRO interest is taxed at 30% with TDS even for a zero-income year. Conversely, NRE interest is tax-free while NRI/RNOR but becomes taxable the moment you become an ordinary resident, so holding NRE forever is not a plan.

Priya, NRI in Sydney with both NRE and NRO accounts

Priya moved to Sydney in 2024 and converted her resident savings account into an NRO account within six months, while opening an NRE account for her Australian salary transfers. Her NRE account earns interest of ₹3,00,000 a year, which is fully tax-free while she is an NRI, under section 10(4). Her NRO account holds the rent from her Delhi flat and the balance of her old savings, and the bank deducts TDS at 30% on the NRO interest of ₹1,20,000, giving TDS of ₹36,000, which she reports in her Indian return along with her rental income. She also holds an FCNR fixed deposit of USD 30,000, whose interest is tax-free while she remains an NRI, and the deposit carries no exchange-rate risk because it is in dollars. When Priya returns to India in 2028 and becomes an ordinary resident, the picture changes: NRE and FCNR interest become taxable from that year, and she converts the NRE account to a resident account as the law expects. If she wants to repatriate some NRO funds to Australia, the limit is USD 1 million per financial year, and the bank requires Form 15CA with a Form 15CB certificate from a chartered accountant before the transfer. Priya keeps the account opening documents, the conversion letters and the interest statements for her Indian filing. A quick call with us dials in the final figure. Priya also checks the tax treatment at the boundary: NRE interest is tax-free under section 10(4) while she is an NRI or RNOR, but the exemption ends the moment she becomes an ordinary resident, and the bank will start deducting TDS on the interest from that year. The FCNR deposit's interest is also exempt while she remains an NRI, and the deposit carries no exchange-rate risk because it is in foreign currency. The NRO account is the only one of the three whose interest is taxed, at 30% with TDS, so she keeps only the minimum balance needed for her Indian expenses there. If she closes the NRO account, the balance is repatriable within the USD 1 million annual limit with Form 15CA/CB. The six-month conversion window applies to the resident accounts she held at the time of departure, and she completed the conversion within it. A quick call with us dials in the final figure.