NRE vs NRO Account Advisor: Complete Guide
Everything you need to know, with real numbers and specific rules cited.
A Non-Resident External (NRE) account is for money earned outside India. The biggest advantage: interest is completely tax-free in India under Section 10(4)(ii) of the Income Tax Act. The money is also fully repatriable, meaning you can send the entire balance (principal + interest) back to the US anytime without RBI approval. NRE accounts can be savings or fixed deposit. FD rates are typically 6-7% for NRIs, and that interest is tax-free. You cannot deposit Indian income (rent, dividends) into an NRE account. That is a FEMA violation.
Key Point
NRE interest is 100% tax-free in India. On a Rs 10,00,000 FD at 7%, you earn Rs 70,000/year without paying a single rupee in Indian tax.
Example
You earn $100,000/year in the US. You send $10,000 to your NRE FD at 7%. Interest earned: Rs 58,450 (~$700). Tax in India: Rs 0. Compare NRO: same deposit, same rate, TDS = Rs 18,236 (31.2%).