NRI Bank Accounts – NRE / NRO / FCNR

As NRI, you can open following different type of Bank accounts in India based on your requirements:

1. NRO – Non-Resident Ordinary Account
2. NRE – Non Resident External Account
3. FCNR (Foreign Currency Non Resident)

NRE  Account vs NRO Account vs FCNR Account – Key Features

	NRE	NRO	FCNR
Type of Account	Savings, Current, FD	Savings, Current, FD	FD
Held in Currency	INR	INR	USD, GBP, EUR, AUD, CAD
Source of Funds	Remittance from Overseas or Transfer from existing NRE/ FCNR Accounts	Local Income in India (Rent, interest or dividend income). Transfer from existing NRE	Remittance from Overseas or Transfer from existing NRE/ FCNR Accounts
Deposit of Rupee funds generated in India	No	Yes	No
Repatriation	Fully repatriable – both principal and Interest	Restricted repatriability Recently RBI has allowed to transfer funds from NRO to NRE account upto maximum of $1 million in a financial year	Fully repatriable – both principal and Interest
Income tax	Interest earned in NRE accounts is fully exempt from tax in India	Taxable in India. Tax will be deducted at source. Can file return & claim refund	Interest earned is fully exempt from tax in India
Joint accounts held with	NRI	NRI / Resident	NRI
Key feature	Rupee Account with repatriation benefits	Account for depositing local funds	Foreign currency deposits with full repatriation benefits and no exchange risk

 

Taxation for NRE , NRO . FCNR Account

Interest on the NRE account and FCNR account are tax free in India. However, countries like the US, which levy tax on global income of its residents and citizens will tax this income. So while interest on NRE and FCNR accounts are tax free in India, a US resident or citizen would have to add this interest to his total income in the US tax return and pay taxes thereon.

For NRIs in tax free zones like the Gulf region, the NRE and FCNR option would work best. For residents of the US, the choice would depend on the tax slab applicable in the US.

Interest on the NRO account is taxable and for NRIs, tax is deducted at source at 30%.

In case of a Double Taxation Avoidance Agreement (DTAA) between India and other countries, this TDS rate would be lower. For instance, the DTAA between India and the US lays down a TDS rate of 15% on interest from deposits in India.

These deposits may also be taxed in the country of your residence. The US, for instance, taxes global income of its residents and citizens. However, if tax has been deducted at source in India, the investor will get a credit in the US for taxes paid in India.

You can always file returns in India and claim refund if your Income is below taxable limit in India.

Summary

NRE Account – Suitable for NRI who wants to transfer foreign earnings into INR and enjoy full repatriability & tax free interest income.

NRO Account – Suitable for NRI who has Income in India (Rent, Pension etc)

FCNR Account – suitable for NRI who wants to keep their money in foreign currency.

You can open multiple accounts to suit your needs.