NRE vs NRO vs FCNR(B): which account, and how much tax?
Updated
Is NRE interest taxable, and how much TDS is deducted on NRO interest?
In tax year 2026-27 NRE interest is not taxed for a non-resident (Income-tax Act 2025, Schedule IV), while NRO interest has 30% tax plus 4% cess deducted — 31.2% on up to ₹50 lakh a year (Finance Act 2026). FCNR(B) interest is not taxed for a non-resident or not ordinarily resident person, and NRO money can go abroad only up to USD 1,000,000 a financial year (RBI).
Official rule: Tax deducted at source on 'the whole of the other income' paid to a non-resident Indian — the line that covers interest on an NRO account: 30% (Finance Act 2026, First Schedule Part II, item 1(b)(i)(O); payer's duty under s.393(2), Table Sl. No. 17). (source, checked 2026-10-21)
Not a valid document. Estimate for information only — not financial advice, not an offer of credit and not a bank document. Errors are possible. Only your bank's or finance company's official offer letter, contract and statements are binding.
What is the difference between NRE, NRO and FCNR(B)?
RBI's own names: the Non-Resident (External) Rupee Account (NRE), the Non-Resident (Ordinary) Account (NRO) and the Foreign Currency (Non-resident) Account (Banks) — the FCNR(B) deposit, often searched as "FCNR deposit" (source, checked 2026-10-21).
| NRE account | NRO account | FCNR(B) deposit | |
|---|---|---|---|
| Who may open | NRIs and PIOs (OCI cardholders count as PIOs) | Any person resident outside India | NRIs and PIOs |
| Currency | Indian rupees | Indian rupees | Any freely convertible foreign currency |
| What goes in | Money from abroad, interest, transfers from NRE/FCNR(B) | Income in India (rent, pension, dividends) and money from abroad | Money from abroad |
| Can the money go back abroad? | Yes, freely | Current income yes; the rest up to USD 1,000,000 a financial year | Yes, freely |
| Interest taxed in India? | No, while you are a non-resident under FEMA | Yes — 30% + surcharge + 4% cess deducted | No, for a non-resident or not ordinarily resident |
| Term deposits | From 1 year | From 7 days | 1 to 5 years, fixed deposits only |
| Joint with a resident | Resident relative, former-or-survivor, may operate only as power of attorney holder | Yes, former-or-survivor | As NRE |
Is NRE interest taxable?
No: interest on an NRE account is not taxed for an individual who is "resident outside India" under FEMA (Income-tax Act 2025, section 11 and Schedule IV, item 1; earlier law: section 10(4)(ii) of the 1961 Act) (source, checked 2026-10-21). RBI says the same (source, checked 2026-10-21). It stops once you become a resident under FEMA — see returning to India.
How much TDS is deducted on NRO interest?
The bank deducts 30% (source, checked 2026-10-21) plus the 4% Health and Education Cess (source, checked 2026-10-21), so 31.2% on interest up to ₹50 lakh a year. Above that a surcharge is added (source, checked 2026-10-21). A lower treaty rate can apply (source, checked 2026-10-21). The deduction is not your final tax — that is settled in your return.
| NRO interest in the tax year | Tax | Surcharge | Cess | All in |
|---|---|---|---|---|
| up to ₹50 lakh | 30% | 0% | 4% | 31.20% |
| above ₹50 lakh to ₹1 crore | 30% | 10% | 4% | 34.32% |
| above ₹1 crore to ₹2 crore | 30% | 15% | 4% | 35.88% |
| above ₹2 crore | 30% | 25% | 4% | 39.00% |
Finance Act 2026, First Schedule Part II (source, checked 2026-10-21). Above ₹5 crore the surcharge is 37% only for someone who opted out of the default tax regime.
Is FCNR(B) interest taxable?
Not for a non-resident or a "not ordinarily resident" person, on deposits with a scheduled bank (co-operative banks excluded): the Income-tax Act 2025 keeps the earlier exemption of section 10(15)(iv)(fa) through Schedule IV, item 14 (source, checked 2026-10-21). That is why FCNR(B) interest stays tax-free in the first years after you return, while NRE interest does not.
How much money can I send abroad from my NRO account?
Up to USD 1,000,000 per financial year (April–March), from NRO balances and the sale of assets in India, with documents, through one bank and after tax (source, checked 2026-10-21). Moving NRO money into an NRE account counts inside that limit (source, checked 2026-10-21). More needs RBI's approval (source, checked 2026-10-21).
What are Form 145 and Form 146 (earlier 15CA and 15CB)?
Before money is paid to a non-resident, Form No. 145 (earlier Form 15CA) is filed; for taxable amounts above ₹5,00,000 in the tax year without an officer's certificate an accountant's Form No. 146 (earlier 15CB) is needed too (source, checked 2026-10-21).
Who decides NRE, NRO and FCNR(B) interest rates?
Each bank. RBI only sets limits: NRE and NRO rates may not be above the bank's own rate on comparable domestic term deposits (source, checked 2026-10-21); FCNR(B) rates may not be above the currency's overnight reference rate or swap rate plus 2.5 percentage points (1 to under 3 years) or 3.5 points (3 to 5 years) (source, checked 2026-10-21). That is why this page uses the rates you type.
Questions people ask
Can I transfer money from NRO to NRE?
Yes — in India, inside the USD 1,000,000 a financial year limit, after tax and with the documents the bank asks for (Form No. 145 and, where needed, Form No. 146).
Can a resident be a joint holder of an NRE account?
Yes — in India, a resident relative on a former-or-survivor basis, who may operate the account only as a power-of-attorney holder while the NRI or PIO holder is alive.
What is the minimum term of an NRE or FCNR(B) deposit?
In India, an NRE term deposit runs at least 1 year; an FCNR(B) deposit from 1 to 5 years; an NRO term deposit from 7 days.
Is TDS on NRO interest the final tax?
No — in India, TDS on NRO interest is withholding. Your final tax depends on your return, the regime you choose and any tax treaty; extra tax deducted comes back as a refund.