If you are an Indian living abroad, the first banking decision you face is which India account to open — and the labels NRE, NRO and FCNR trip up almost everyone. The rule of thumb is simple: money you earn abroad goes into an NRE account, money you earn in India goes into an NRO account, and money you want to keep in foreign currency goes into an FCNR deposit. The rest of this guide explains why, with the tax and repatriation detail that decides real cases. Rules below are as of June 2026 under FEMA and the Income-tax Act.
NRE vs NRO vs FCNR at a glance
| Feature | NRE (External) | NRO (Ordinary) | FCNR (Foreign Currency) |
|---|---|---|---|
| What you put in it | Foreign earnings (remitted to India) | India-source income — rent, dividends, pension | Foreign earnings, held in foreign currency |
| Currency held | Indian rupees | Indian rupees | Foreign currency (USD, GBP, EUR, etc.) |
| Interest taxable in India? | No — tax-free | Yes — 30% TDS | No — tax-free |
| Principal repatriable? | Fully repatriable | Up to USD 1 million / financial year | Fully repatriable |
| Rupee exchange-rate risk | Yes (held in INR) | Yes (held in INR) | No (held in foreign currency) |
| Joint holding | With another NRI, or resident relative (former/survivor) | With another NRI or a resident (either/survivor) | Same as NRE |
| Account types | Savings, current, RD, FD | Savings, current, RD, FD | Term deposit only (1–5 yrs) |
| Best for | Parking foreign salary; tax-free FDs | Receiving Indian income; paying India bills | Avoiding rupee risk on short horizons |
Repatriation and tax rules as of June 2026 — verify the current FEMA position and your bank's terms before opening.
NRE account — for money you earn abroad
An NRE (Non-Resident External) account takes your foreign-currency earnings, converts them to rupees and holds them in India. Its two big advantages are that interest is fully tax-free in India and both principal and interest are freely repatriable — you can send the money back out without limit or paperwork friction. The trade-off is rupee exchange-rate risk: because the balance is in INR, a falling rupee erodes its value when measured in your home currency. NRE is the default home for a salary earned in the US, UAE, UK or Singapore that you want to invest in India, and an NRE fixed deposit is the cleanest tax-free rupee return an NRI can get — see our NRE FD rates comparison.
NRO account — for money you earn in India
An NRO (Non-Resident Ordinary) account is where your India-source income lands: rent from a flat you own, dividends, a pension, or the proceeds of investments made before you left. Interest on an NRO account is taxable in India and the bank deducts 30% TDS (plus surcharge and 4% cess) on it — you can reclaim part of it via a DTAA relief or a return, covered in our NRI tax slab guide. Repatriation from an NRO account is capped at USD 1 million per financial year and needs a chartered accountant's certificate (Forms 15CA/15CB). Almost every NRI needs an NRO account simply to receive Indian income legitimately.
FCNR deposit — for zero rupee risk
An FCNR (Foreign Currency Non-Resident) deposit is a term deposit held in the foreign currency itself, so a rupee swing never touches it. Interest is tax-free in India and the deposit is fully repatriable. The catch is that foreign-currency interest rates are usually lower than rupee NRE FD rates, so FCNR makes sense when you are confident you will withdraw the money abroad and do not want to bet on the rupee. It is a currency-hedging tool more than a yield play.
Which account should you open?
- You earn abroad and want to invest in India: open an NRE account (savings + FD) for tax-free, fully repatriable rupee returns.
- You have Indian income — rent, dividends, a maturing policy: you must hold an NRO account to receive it legitimately.
- You want no rupee exchange risk on funds you will take back out: choose an FCNR deposit.
- Most NRIs need both NRE and NRO — NRE for foreign money, NRO for Indian money — and many banks open the pair together.
Whichever account holds your money, the next questions are how it is taxed and how to move funds across borders cheaply. Continue with our NRI tax slab and RNOR guide, and when you remit, compare methods in send money to India.