Short answer
Three accounts, three jobs. Money you earn abroad goes into an NRE (Non-Resident External) account. Money that arises in India — rent, a pension, dividends — goes into an NRO (Non-Resident Ordinary) account. A deposit you want to keep in a foreign currency, not rupees, is an FCNR(B) (Foreign Currency Non-Resident, Bank) account. If you both earn abroad and have money arising in India, you will want an NRE and an NRO. FCNR(B) is optional.
This guide is for Non-Resident Indians (NRIs) and people of Indian origin (PIOs) — anyone living outside India with money coming in or going out there, or about to move abroad. It is not a tax-filing guide; for the deeper tax and transfer steps we point you to sister guides as we go.
What each account is
| Property | NRE | NRO | FCNR(B) |
|---|---|---|---|
| Currency, and who can hold it | A rupee account for Non-Resident Indians (NRIs) and people of Indian origin (PIOs). | A rupee account that anyone living outside India may open for everyday rupee dealings, including income arising in India. | A foreign-currency deposit, held as a fixed deposit, so your money never turns into rupees and carries no rupee risk. |
| What goes in | Money you send from abroad, transfers from another NRE or FCNR(B) account, and the interest it earns. | Income that arises in India, money sent from abroad, and transfers from other NRO accounts. | A fixed deposit with a term of one year up to five years; a bank will not take or renew one for longer. |
| Indian tax on the interest | None while you are a non-resident, for tax years from 2026-27. | Tax is deducted at source — TDS. For a non-resident Indian the rate on ordinary interest is 30%, before any surcharge and cess, for 2026-27. | None while you are a non-resident, for tax years from 2026-27. |
| Sending the money abroad | Freely — principal and interest alike. | Capped: up to the yearly NRO limit, with documents (see below). | Freely, on the same terms as an NRE account. |
| Holding it jointly | With another NRI or PIO, or a resident relative, on a “former or survivor” basis. | With a resident on a “former or survivor” basis, or with other NRIs and PIOs. | As for an NRE account. |
Sending NRO money abroad. Money in an NRE or FCNR(B) account leaves India freely; an NRO account is capped. You, as an NRI or PIO, may send up to USD 1 million from your NRO balances each financial year, including the proceeds of selling Indian assets, once you show the paperwork. The bank releases an NRO transfer only after you give it the information in the formats that the Central Board of Direct Taxes prescribes. For the financial year 2026-27 that paperwork is Form No. 145 and, where an accountant’s certificate is needed, Form No. 146. How the certificate route works step by step is its own topic; see our NRO repatriation guide.
On the NRO rate. So 30% is only the default: where India and the country you live in have a Double Taxation Avoidance Agreement, or DTAA, the rate on your NRO interest can be lower once you show the treaty papers — our DTAA guide shows how.Our reading
If you live in the US, the UK or the Gulf. If you are a US citizen or resident, the US taxes your worldwide income, so interest on your Indian accounts — even NRE or FCNR(B) interest that India treats as tax-free — is generally still taxable in the US. You must also report your Indian accounts: a US person files an FBAR (FinCEN Form 114) once all their foreign accounts together pass USD 10,000 at any point in the year. If you are a UK resident, the UK normally taxes your foreign income, including savings interest, so interest on your Indian accounts is generally taxable there even when India exempts it. If you live in the Gulf, the Indian exemption on NRE and FCNR(B) interest settles the Indian side; whether your home country taxes it depends on its own rules, so check them.
Which one for what
Indian income — rent, a pension, dividends — normally belongs in your NRO account, and reaches an NRE account only where the bank is satisfied that Indian tax on it has been paid or set aside.Our reading Not sure where a particular kind of money should land? Find the source below and read across to the account, how freely the money leaves India, and whether India taxes the interest.
| Where the money comes from | Account | Sending it abroad | Indian tax on the interest |
|---|---|---|---|
| Salary you earn abroad | NRE | Freely | Exempt in India |
| Rent from a flat in India | NRO | Only up to the yearly NRO limit, with documents | TDS applies |
| A pension from India | NRO | Only up to the yearly NRO limit, with documents | TDS applies |
| Dividends from Indian shares | NRO | Only up to the yearly NRO limit, with documents | TDS applies |
| Sale proceeds of Indian property | NRO | Only up to the yearly NRO limit, with documents | TDS applies |
| Savings you already hold abroad | NRE, or FCNR(B) to stay in a foreign currency | Freely | Exempt in India |
A summary of the rules above: the account a kind of money lands in decides how freely it leaves India and the Indian tax on the interest. Rent, a pension and dividends arise in India, so NRO is their home; see Our reading on the narrow case where such income reaches an NRE account.
Investing those savings is a topic of its own; see our guide on investing from the Gulf.
A worked example, in dirhams and rupees
Anil and Meera are made up for this guide, and the figures are illustrative — not today’s rates. Anil works in the Gulf and sends part of his salary home each month. Meera’s late father left her a flat in Pune that is rented out. They want the savings set aside, the rent to cover her mother’s costs, and a way to move money back to the Gulf one day.
| Flow | Account | What happens |
|---|---|---|
| Anil’s monthly transfer from the Gulf | NRE | AED 4,000 a month lands here. The interest is free of Indian tax, and the whole balance is repatriable. |
| Rent from the Pune flat | NRO | INR 25,000 a month. As Meera is a non-resident, tax is deducted at source: INR 7,500 (30%) is withheld, and she receives INR 17,500. |
| Moving money back to the Gulf | NRO → abroad | Up to USD 1 million a financial year, with Form 145/146. From the NRE account it needs nothing. |
The two streams never mix. Anil’s NRE balance leaves India whenever he likes; Meera’s rent waits for the paperwork.
Before you open the accounts
A few mistakes catch people out:
- Letting Indian rent or dividends land in your NRE account; Indian income belongs in your NRO account.
- Running an old resident savings account after you move abroad, instead of redesignating it as NRO.
- Reading “tax-free in India” as tax-free everywhere; in the US or the UK it usually is not.
- Forgetting the yearly cap and the Form 145/146 paperwork when you move money out of NRO.
Then, when you set the accounts up:
When you are ready, we will help you work out which accounts fit and open them with your bank, and tell you what to ask your accountant for the tax filing. One question is enough to start: ask Rohit in the question box on this page.
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Points of interpretation
Where the rule leaves room for more than one reading, we say so and show both.
Whether income arising in India (rent, a pension, dividends) may ever be credited to an NRE account.
The default is to route Indian income through NRO. Current income such as rent, a pension or dividends may be credited to an NRE account only in the narrow case where the bank is satisfied that Indian income tax on it has been deducted, paid or provided for — so most readers should treat NRO as the home for Indian income.
Indian-source income such as rent, a pension or dividends must always be credited to an NRO account and can never go into an NRE account.
Whether the 30% statutory rate is the final rate of TDS on NRO interest for every non-resident.
30% is the default. Because the Act deducts at the 'rates in force', a Double Taxation Avoidance Agreement between India and your country of residence can set a lower rate on interest where you furnish the treaty documents. This guide does not work the treaty rate — see the DTAA guide.
The 30% rate in force is the final rate of TDS on NRO interest for every non-resident, in every country.
Sources
- Master Direction - Deposits and Accounts
- Part II, para 4 (Non-Resident (External) Rupee Account Scheme) and 4.1
- Part II, para 4.5 (NRE – permissible credits)
- Part II, para 4.4 (NRE – remittances)
- Part II, para 4.3 (NRE – joint accounts)
- Part II, para 5 (Foreign Currency (Non-resident) Account (Banks) Scheme), 5.1 and 5.2
- Part II, para 5.3 (FCNR(B) – other conditions as for NRE)
- Part II, para 6.1 (Non-Resident (Ordinary) Account Scheme)
- Part II, para 6.7 (NRO – permissible credits)
- Part II, para 6.6 (NRO – joint holding)
- Part II, para 6.14 (NRO – Income-Tax)
- Part II, para 6.10 (NRO – re-designation)
- Part II, para 4.7 (NRE – current income as a permissible credit)
- Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026
- Schedule IV [See section 11], Serial No. 1 (nature of income col. B: 'Any income by way of interest'; condition col. D)
- Schedule IV [See section 11], Serial No. 14 (incorporating section 10(15)(iv)(fa) of the Income-tax Act, 1961)
- Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016
- Chapter V, para 19(b)(i) (Tenor of deposits — FCNR(B) maturity-period table and proviso)
- Income-tax Act, 2025 (Act 30 of 2025), as amended by the Finance Act, 2026
- Section 393(2), Table Serial No. 17 (recipient: any non-resident (not being a company) or a foreign company; rate column: Rates in force)
- Section 393(2), Table Serial No. 17 (rate column: Rates in force)
- The Finance Act, 2026, First Schedule
- First Schedule (See sections 2 and 3), Part II (Rates for deduction of tax at source), item 1(b)(i) (person not resident in India — in the case of a non-resident Indian), sub-item (O): on the whole of the other income — rate column 30%
- First Schedule (See sections 2 and 3), Part II (Rates for deduction of tax at source), item 1(b)(i), sub-item (O) (person not resident in India — non-resident Indian — on the whole of the other income). Part II preamble lists section 393(2) [Table: Sl. No. 17] among the provisions deducted at 'rates in force'; rent to a non-resident sits in that Sl. No. 17 ('any other sum chargeable'), not the resident-only rent entry at section 393(1) Sl. No. 2.
- Master Direction - Remittance of Assets
- Para 3 (Remittance of assets permitted under the regulations), clause allowing NRIs/PIOs to remit out of NRO balances / sale proceeds of assets
- Income-tax Rules, 2026 — Rule 220
- Rule 220 (Furnishing of information for payment to a non-resident, not being a company, or to a foreign company), sub-rules (1)(a)–(c) and (4)
- U.S. Citizens and Resident Aliens Abroad
- Introductory paragraph ('Taxpayers with foreign financial accounts' / worldwide-income statement)
- Report of Foreign Bank and Financial Accounts (FBAR)
- 'Who must file' — U.S. person filing threshold
- Tax on foreign income
- 'Paying tax on foreign income' (foreign income includes 'foreign investment income, for example dividends and savings interest')
What changed
- 23 October 2026
- First version.
- 23 October 2026
- Removed an unsourced aside naming the forms that Forms 145 and 146 replaced.
- 24 October 2026
- Pointed the closing line at the Ask Rohit box at the end of the guide.
- 24 October 2026
- Removed the email address from the closing line, which now points only at the Ask Rohit box.
- 24 October 2026
- Pointed the closing line at the question box on this page, which sits beside the guide on wide screens.
- 25 October 2026
- The line under the title now reads "Reviewed by the Rooted Bharat editor".
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