One of the first questions I get from NRIs in our community is about bank accounts.
“What happens to my savings account when I move abroad?”
“Which account should I use to send money home?”
“I’m planning to return – what do I do with my NRE account?”
These are valid concerns. And honestly, the banking rules for NRIs can feel overwhelming at first.
But here’s the thing – once you understand the basics, it all makes sense.
In this guide, I’ll explain everything about NRI accounts. What they are, which one you need, how to use them, and most importantly – what to do when you return to India.
What is an NRI Account?
An NRI account is a bank account specifically designed for Non-Resident Indians to manage their money in India.
When you become an NRI (by moving abroad for employment, business, or other purposes), you can no longer use a regular resident savings account.
As per FEMA (Foreign Exchange Management Act) guidelines, you must convert your existing savings account to an NRI account or open a new one.
There are three main types of NRI accounts:
- NRE Account (Non-Resident External)
- NRO Account (Non-Resident Ordinary)
- FCNR Account (Foreign Currency Non-Resident)
Each serves a different purpose.
Let me break them down one by one.
NRE Account (Non-Resident External)
What is it?
An NRE account is for parking your foreign earnings in India.
You deposit money in foreign currency (USD, GBP, EUR, etc.), and it gets converted to Indian Rupees at the prevailing exchange rate.
Key Features
| Feature | Details |
|---|---|
| Currency | Indian Rupees (INR) |
| Source of Funds | Foreign income only (salary, business income, overseas investments) |
| Repatriation | Fully repatriable – both principal and interest |
| Taxation | Interest is 100% tax-free in India |
| TDS | No TDS deducted |
| Joint Holding | Only with another NRI |
| Account Types | Savings, Current, Fixed Deposit, Recurring Deposit |
When to Use NRE Account
- To send your foreign salary to India for family support
- To save money in India while earning tax-free interest
- To invest in India (mutual funds, stocks, property)
- When you want the flexibility to take money back abroad anytime
Interest Rates (2025)
| Bank | NRE Savings | NRE FD (1-2 years) |
|---|---|---|
| SBI | 2.70% | 6.45% |
| HDFC Bank | 3.00% | 6.60% |
| ICICI Bank | 3.00% | 6.70% – 7.25% |
| Axis Bank | 3.00% | 6.60% |
| Bank of India | 2.90% | 6.70% |
Note: Rates are indicative and subject to change. Always verify with your bank.
The Big Advantage
The interest you earn on NRE accounts is completely tax-free in India.
No TDS is deducted. No need to declare it in your Indian tax return.
This makes NRE FDs particularly attractive. You can earn 6-7% interest, tax-free, with the option to repatriate everything whenever you want.
NRO Account (Non-Resident Ordinary)
What is it?
An NRO account is for managing income you earn within India.
Think of it as the account where all your Indian income goes – rent from property, dividends, pension, or any other domestic earnings.
Key Features
| Feature | Details |
|---|---|
| Currency | Indian Rupees (INR) |
| Source of Funds | Income earned in India (rent, dividends, pension, etc.) |
| Repatriation | Limited – up to USD 1 million per financial year |
| Taxation | Interest is fully taxable |
| TDS | 30% + surcharge & cess (can be reduced via DTAA) |
| Joint Holding | Can be held with NRI or resident Indian |
| Account Types | Savings, Current, Fixed Deposit, Recurring Deposit |
When to Use NRO Account
- To receive rental income from property in India
- To receive pension or dividend income
- To manage proceeds from sale of assets in India
- When you have income sources within India that need a local account
Interest Rates (2025)
NRO interest rates are similar to NRE rates.
| Bank | NRO Savings | NRO FD (1-2 years) |
|---|---|---|
| SBI | 2.70% | 6.60% |
| HDFC Bank | 3.00% | 6.60% |
| ICICI Bank | 3.00% | 6.70% – 7.10% |
| Axis Bank | 3.00% | 6.60% |
The Catch – TDS and Taxation
Interest on NRO accounts is taxable at 30% + surcharge and cess (approximately 30.9%).
The bank deducts this TDS automatically before crediting interest to your account.
But here’s something many NRIs don’t know:
If your country has a Double Taxation Avoidance Agreement (DTAA) with India, you can reduce this TDS significantly.
| Country | DTAA Rate |
|---|---|
| UAE | 12.5% |
| USA | 15% |
| UK | 15% |
| Canada | 15% |
| Singapore | 15% |
| Saudi Arabia | 10% |
To claim the lower DTAA rate, submit these documents to your bank:
- Tax Residency Certificate (TRC) from your country of residence
- Form 10F (self-declaration)
- Self-declaration of no Permanent Establishment in India
This can save you thousands of rupees every year.
Repatriation Limit
You can repatriate up to USD 1 million per financial year from your NRO account.
This includes all your NRO accounts combined.
To repatriate, you need:
- Form 15CA (online declaration)
- Form 15CB (CA certification)
- Proof that all taxes have been paid
For amounts below Rs 5 lakh, Form 15CB may not be required, but most banks ask for it anyway.
FCNR Account (Foreign Currency Non-Resident)
What is it?
An FCNR account lets you keep your foreign currency in India without converting it to rupees.
It’s a fixed deposit account – not a savings account.
Key Features
| Feature | Details |
|---|---|
| Currency | Foreign currency (USD, GBP, EUR, AUD, CAD, SGD, etc.) |
| Account Type | Fixed Deposit only (1-5 years) |
| Repatriation | Fully repatriable |
| Taxation | Interest is tax-free in India |
| TDS | No TDS deducted |
| Currency Risk | Protected – no exchange rate fluctuation |
When to Use FCNR Account
- When you want to protect your money from rupee depreciation
- When you’re unsure about when you’ll need the funds
- For parking large sums in foreign currency
- As a hedge against currency fluctuation
Interest Rates (2025)
FCNR rates are generally lower than NRE rates because they’re denominated in foreign currency.
| Currency | Rate Range |
|---|---|
| USD | 4.00% – 4.60% |
| GBP | 4.25% – 4.50% |
| EUR | 1.65% – 2.00% |
| AUD | 3.75% – 4.00% |
| CAD | 2.65% – 3.00% |
Rates vary by bank and tenure.
The Trade-off
FCNR accounts offer currency protection but lower returns compared to NRE FDs.
If you believe the rupee will depreciate significantly, FCNR makes sense.
If you’re comfortable with rupee exposure and want higher returns, NRE FD is better.
Quick Comparison: NRE vs NRO vs FCNR
| Feature | NRE | NRO | FCNR |
|---|---|---|---|
| Purpose | Foreign income | Indian income | Foreign currency deposit |
| Currency | INR | INR | Foreign (USD, GBP, etc.) |
| Tax on Interest | Tax-free | Taxable at 30%+ | Tax-free |
| TDS | No | Yes (30%+) | No |
| Repatriation | Fully free | USD 1 million/year | Fully free |
| Joint with Resident | No (former/survivor only) | Yes | No |
| Account Types | Savings, FD, RD, Current | Savings, FD, RD, Current | FD only |
| Currency Risk | Yes (INR) | Yes (INR) | No (foreign currency) |
Which Account Do You Need?
Here’s my simple recommendation based on your situation:
Scenario 1: You Earn Abroad, Family in India
You need: NRE Account
Send your foreign salary to India. Your family can withdraw in rupees. Interest is tax-free. You can take it back anytime.
Scenario 2: You Have Rental Income from Indian Property
You need: NRO Account
Rental income must go to NRO. The interest is taxable, but you can claim DTAA benefits to reduce TDS.
Scenario 3: You Want to Protect Against Rupee Depreciation
You need: FCNR Account
Park your foreign currency without converting to INR. Get tax-free interest and zero currency risk.
Scenario 4: You Have Multiple Income Sources
You need: Both NRE and NRO Accounts
Most NRIs maintain both. Use NRE for foreign income and NRO for Indian income.
Scenario 5: You’re Planning to Return Soon
You need: NRE + understanding of RFC Account
Maximize NRE deposits now (tax-free interest). When you return, you’ll convert to RFC or resident account.
How to Open an NRI Account
From Abroad (Before Visiting India)
Most major banks allow online account opening.
Documents Needed:
- Valid Indian passport (front and back)
- Valid visa/work permit
- Foreign address proof (utility bill, bank statement, or resident ID)
- Indian address proof (for correspondence)
- Passport-size photographs
- PAN card (or Form 60 if no PAN)
Process:
- Visit the bank’s NRI portal
- Fill online application
- Upload documents
- Complete video KYC (most banks now offer this)
- Fund your account through wire transfer
From India (During a Visit)
Walk into any branch with the same documents.
Some banks prefer to open accounts when you visit – it makes KYC easier.
Pro tip: If you’re opening an account with SBI, ICICI, HDFC, or Axis Bank, they have dedicated NRI branches in major cities. The staff there understands NRI requirements better.
For detailed information on best NRI accounts, I’ve written a separate comparison.
Minimum Balance Requirements
| Bank | NRE/NRO Savings | NRE/NRO FD |
|---|---|---|
| SBI | Rs 3,000 – 5,000 | Rs 10,000 |
| HDFC Bank | Rs 10,000 – 25,000 | Rs 10,000 |
| ICICI Bank | Rs 10,000 – 25,000 | Rs 25,000 |
| Axis Bank | Rs 25,000 – 1,00,000 | Rs 25,000 |
| Kotak Mahindra | Rs 25,000 – 1,00,000 | Rs 25,000 |
Note: Requirements vary by account variant and location.
Non-maintenance of minimum balance attracts monthly charges ranging from Rs 150 to Rs 750.
Transferring Money Between Accounts
NRE to NRO
Allowed without any restrictions.
Simply transfer online or request your bank.
NRO to NRE
This is considered repatriation.
You need:
- Form 15CA (filed online with Income Tax Department)
- Form 15CB (certification from a Chartered Accountant)
- Proof that all taxes have been paid
The transfer counts against your USD 1 million annual limit.
NRE to FCNR
Allowed. You can convert your INR in NRE to foreign currency in FCNR.
But remember – FCNR is only for fixed deposits, not savings.
FCNR to NRE
Allowed on maturity. The foreign currency converts to INR at prevailing rates.
What Happens When You Return to India?
This is the question I get most often.
When you return to India permanently, your status changes from NRI to Resident.
Here’s what you need to do:
Step 1: Inform Your Bank
As soon as you return with the intention to stay (or within 30 days), notify your bank about your change in residential status.
This is your responsibility. The bank won’t automatically know.
Step 2: Convert Your Accounts
NRE Account Options:
- Convert to Resident Savings Account – The money stays in INR, but the account becomes a regular savings account. Interest becomes taxable.
- Convert to RFC (Resident Foreign Currency) Account – If you want to keep money in foreign currency. Useful if you might go abroad again or want to hold USD/GBP.
NRO Account:
Convert to a regular resident savings account. The tax treatment remains similar (interest is taxable).
FCNR Account:
You can hold it until maturity. On maturity, transfer to RFC account or convert to resident savings.
Step 3: Understand RFC Account
RFC (Resident Foreign Currency) account is for returning NRIs.
Key Features:
| Feature | Details |
|---|---|
| Who can open | Returning NRIs who stayed abroad for 1+ years |
| Currency | Foreign (USD, GBP, EUR, etc.) |
| Repatriation | Fully repatriable |
| Taxation | Taxable at slab rates (but tax-free during RNOR period) |
| Purpose | Hold foreign currency in India after return |
Why RFC is useful:
- Protects you from currency fluctuation
- Funds remain repatriable if you go abroad again
- Can be transferred back to NRE/FCNR if you become NRI again
- Interest is tax-free during RNOR status (usually 2-3 years after return)
Step 4: Take Advantage of RNOR Status
When you return, you likely qualify as RNOR (Resident but Not Ordinarily Resident) for 2-3 years.
During this period:
- Only your Indian income is taxable
- Foreign income remains tax-free
- Interest on RFC and FCNR accounts is tax-free
This is a significant tax advantage. Plan your finances to maximize this period.
I’ve written more about the return to India process if you’re planning your move.
Common Scenarios and What to Do
Scenario 1: You Left India Recently – Haven’t Converted Accounts Yet
What should you do?
Convert your existing savings account to NRO immediately.
For your foreign earnings, open a new NRE account.
Don’t continue using a resident savings account as an NRI – it violates FEMA regulations.
Scenario 2: You Want to Buy Property in India
Which account to use?
You can use funds from NRE or NRO account.
But here’s the key difference:
- NRE funds: If you sell the property later, you can repatriate sale proceeds freely (up to 2 properties in your lifetime purchased with NRE funds)
- NRO funds: Sale proceeds go to NRO and are subject to USD 1 million annual repatriation limit
For property purchase, using NRE funds is generally better for repatriation flexibility.
Check out can NRI buy property in India for detailed rules.
Scenario 3: You’re Selling Property in India
Where does the money go?
Sale proceeds must be deposited in your NRO account (not NRE).
TDS will be deducted by the buyer (20% for long-term capital gains).
You can repatriate up to USD 1 million per year after paying all applicable taxes.
To repatriate more than USD 1 million, you need RBI approval.
Pro tip: Apply for a Lower Deduction Certificate (Form 13) before the sale if your actual tax liability is less than the TDS rate. This prevents excess TDS deduction.
Scenario 4: You Receive Inheritance in India
Which account?
Inherited funds go to NRO account.
Interest is taxable. Repatriation is limited to USD 1 million/year.
Scenario 5: Parents Want to Gift You Money
Gifts from Resident Indians:
Can be deposited in your NRO account.
Gifts are not taxable in India, but the interest earned is.
Gifts from other NRIs:
Can be deposited in NRE or NRO, depending on the source of their funds.
Scenario 6: You’re a US NRI Worried About FBAR
If you’re in the US, you must report your Indian bank accounts on FBAR if the aggregate value exceeds $10,000 at any point during the year.
This includes NRE, NRO, and FCNR accounts.
Failure to file FBAR can result in significant penalties.
Learn more about FBAR requirements for NRIs.
Mistakes to Avoid
1. Not Converting Your Savings Account
When you become an NRI, your resident savings account must be converted to NRO.
Continuing to use it as a regular account violates FEMA rules.
2. Depositing Foreign Income in NRO
Foreign salary and income should go to NRE account (tax-free interest).
Depositing it in NRO makes the interest taxable unnecessarily.
3. Not Claiming DTAA Benefits
Many NRIs pay 30% TDS on NRO interest when they could pay 10-15% via DTAA.
Submit Form 10F and Tax Residency Certificate to your bank annually.
4. Ignoring Repatriation Limits
NRO has a USD 1 million annual limit.
If you sell multiple properties or have large Indian income, plan your repatriation across financial years.
5. Not Informing Bank When You Return
The bank won’t automatically know you’ve returned.
Inform them promptly to convert accounts and avoid compliance issues.
6. Premature Withdrawal of NRE FD
If you withdraw NRE FD before 1 year, you get zero interest.
Plan your deposits with maturity dates in mind.
Tax Implications Summary
| Account Type | Interest Taxable in India? | TDS Rate |
|---|---|---|
| NRE Savings | No | 0% |
| NRE FD | No | 0% |
| NRO Savings | Yes | 30% + cess |
| NRO FD | Yes | 30% + cess |
| FCNR | No | 0% |
| RFC (during RNOR) | No | 0% |
| RFC (after becoming ROR) | Yes | Slab rates |
Important: While NRE interest is tax-free in India, you may need to declare it in your country of residence (e.g., US residents must report worldwide income).
Documents Checklist for Opening NRI Account
Identity Proof:
- Valid Indian passport
- OCI card (if applicable)
Address Proof (Foreign):
- Utility bill (electricity, water, gas)
- Bank statement
- Driving license
- Resident ID card
Address Proof (Indian):
- Aadhaar card (if available)
- Utility bill at Indian address
- Passport with Indian address
Other Documents:
- Valid visa/work permit
- Employment letter or business proof
- PAN card (or Form 60)
- Passport-size photographs
Frequently Asked Questions
Can I have both NRE and NRO accounts?
Yes, absolutely. Most NRIs maintain both. Use NRE for foreign income and NRO for Indian income.
Can my family in India operate my NRI account?
Yes, through Power of Attorney (POA). But POA holders can only do local transactions – they cannot repatriate funds or close the account.
What if I don’t have a PAN card?
You can open an NRI account without PAN by submitting Form 60. However, having a PAN is recommended for easier tax compliance and investments.
Can I invest in mutual funds using NRI accounts?
Yes. You can invest from both NRE and NRO accounts. NRE investments are repatriable; NRO investments have limited repatriation.
Is there a limit on how much I can deposit?
No upper limit for NRE or NRO deposits. You can deposit any amount.
What happens to my account if I keep switching between NRI and Resident status?
Your account type should change with your status. Inform your bank each time. NRE can convert to RFC or resident; RFC can convert back to NRE if you become NRI again.
Can I take a loan against my NRI FD?
Yes. Most banks offer overdraft facilities against NRE and FCNR FDs. The loan is typically up to 90% of the FD value.
How do I transfer money from abroad to my NRE account?
Through international wire transfer (SWIFT) or online remittance services. The money arrives in foreign currency and converts to INR at prevailing rates.
My Recommendations
Based on my experience helping thousands of NRIs:
If you’re just moving abroad:
- Open an NRE account for your foreign income
- Convert existing savings to NRO for any Indian income
- Start with one of the big banks (SBI, ICICI, HDFC) – their NRI services are mature
If you’re settled abroad:
- Maximize NRE FDs for tax-free returns (6-7%)
- Consider FCNR if you’re worried about rupee depreciation
- Use NRO only for Indian income – don’t park foreign earnings there
If you’re returning to India:
- Convert NRE to RFC if you want to hold foreign currency
- Take advantage of RNOR status (2-3 years of tax benefits)
- Plan repatriation from NRO across financial years if amounts are large
Always:
- Keep your KYC updated
- Inform banks about status changes promptly
- Claim DTAA benefits on NRO accounts
- Maintain minimum balance to avoid charges
Final Thoughts
NRI accounts aren’t complicated once you understand the basics.
NRE is for foreign income – tax-free and fully repatriable.
NRO is for Indian income – taxable but necessary.
FCNR is for foreign currency deposits – tax-free with currency protection.
The key is to use the right account for the right purpose.
And when you return to India, convert your accounts promptly and take advantage of the RNOR period.
If you have specific questions or want to discuss your situation, join our WhatsApp community at https://backtoindia.com/groups.
Over 20,000 NRIs helping each other navigate these decisions – from account opening to return planning. It’s free and volunteer-run.
Related Resources
- Best NRI Account in India – Comparison
- NRE Account – Complete Guide
- NRI Banking Comparison – SBI vs ICICI vs HDFC
- How to Open NRI Account in India from USA
- Return to India Checklist
- DTAA Benefits for NRIs
- ITR Filing for NRIs
- Convert NRE to NRO Account
Disclaimer: This article is for informational purposes only. Banking regulations, interest rates, and tax rules change frequently. Always verify current details with your bank and consult a qualified financial advisor for advice specific to your situation. BacktoIndia.com is not affiliated with any bank mentioned in this article.
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