Question 1

What is the difference between NRE and NRO accounts?

Accepted Answer

NRE (Non-Resident External) accounts hold foreign income, offer tax-free interest in India, and are fully repatriable. NRO (Non-Resident Ordinary) accounts hold Indian income (rent, dividends, pension), have interest taxed at 31.2% (TDS under Section 195), and repatriation is capped at $1,000,000 per year. Both are regulated by the RBI under FEMA.

Question 2

Can I deposit my US salary into an NRO account?

Accepted Answer

Technically yes, but you should not. NRO interest is taxed at 31.2% in India. If you deposit foreign earnings into NRE instead, the interest is completely tax-free under Section 10(4)(ii) of the Income Tax Act. Using NRO for foreign income means unnecessary tax.

Question 3

What is FCNR and when should I use it?

Accepted Answer

FCNR (Foreign Currency Non-Resident) is a fixed deposit in foreign currency (USD, GBP, EUR) with Indian banks. Interest is tax-free in India. Use it when you want to park USD in India for 1-5 years without currency risk. The tradeoff: FCNR USD rates (3-5%) are lower than NRE rupee FD rates (6-7%).

Question 4

How much can I repatriate from my NRO account?

Accepted Answer

Up to $1,000,000 per financial year (April to March), after tax. You need a CA certificate (Form 15CB) and the bank files Form 15CA with the Income Tax Department. This limit covers current income (rent, dividends) and balances. Property sale proceeds have a separate limit of $1M per property under RBI's general permission.

Question 5

Is NRE account interest taxable in the US?

Accepted Answer

Yes. While NRE interest is tax-free in India, the US taxes worldwide income. You must report NRE interest on your US tax return (Schedule B). However, since no Indian tax was paid, you cannot claim a Foreign Tax Credit for this income. The effective tax depends on your US marginal rate.

Question 6

What happens to my NRE account when I return to India?

Accepted Answer

When you become a resident Indian, your NRE account is redesignated as a regular resident savings account. FCNR deposits continue until maturity at the same terms. During the RNOR (Resident but Not Ordinarily Resident) period (typically 2-3 years), foreign income is not taxed in India, so plan your NRE FD maturities to fall within this window.

Question 7

Do I need to report my NRE/NRO accounts on FBAR?

Accepted Answer

Yes. If the aggregate balance of all your foreign financial accounts (including NRE, NRO, FCNR, and any other Indian accounts) exceeds $10,000 at any point during the year, you must file FBAR (FinCEN 114). Separately, if your foreign financial assets exceed $50,000 (single) or $100,000 (married filing jointly), you must also file Form 8938 (FATCA) with your tax return.

Question 8

Can I have a joint NRE account with a resident Indian?

Accepted Answer

Yes, but with restrictions. An NRE account can be jointly held with another NRI or a resident Indian (on a former or survivor basis only). The resident Indian cannot operate the account independently. For NRO accounts, joint holding with a resident Indian is permitted without such restrictions.

Question 9

What is the minimum balance for NRE and NRO accounts?

Accepted Answer

Minimum balance requirements are set by individual banks, not RBI. Most banks require Rs 10,000 to Rs 25,000 for NRE/NRO savings accounts. Some banks waive the minimum if you maintain a linked NRE/NRO FD. SBI requires Rs 10,000, ICICI requires Rs 10,000, and HDFC requires Rs 10,000 for NRE savings.

Question 10

I became an NRI but still have a resident savings account. What do I do?

Accepted Answer

You must convert it to an NRO account. Under FEMA, maintaining a resident account after becoming an NRI is a violation. Contact your bank to redesignate it. Most banks do this with a form and updated KYC documents (passport, visa, overseas address proof). Failure to convert can attract penalties under FEMA of up to three times the amount involved.

NRE vs NRO Account Advisor: Frequently Asked Questions