The test is where the money was earned, not where you live. Money earned outside India goes in an NRE account. Money earned inside India — rent, dividends, a pension, an old salary — must go in an NRO account. FCNR(B) is a third thing: a fixed deposit held in foreign currency, so a falling rupee cannot eat your savings. Most NRIs need an NRE account and an NRO account. Very few need all three.
Which account does an NRI actually need?
Start with the source of the funds. That single question settles it.
| Item | Details |
|---|---|
| You are sending money home from a job abroad. | NRE account. The interest is exempt from income tax and the whole balance can go back out. |
| You still collect rent or dividends in India. | NRO account. You have no choice. Indian income cannot be credited to an NRE account. |
| You do not want your savings held in rupees. | FCNR(B). It is a fixed deposit in a permissible foreign currency, so the rupee’s movement does not touch the principal. |
Opening an NRE account does not close the NRO question. If you own property in India, you will need both.
What the rules say, in one table
| Rule or limit | What applies | Account | Source |
|---|---|---|---|
| Who may open it | NRIs and Persons of Indian Origin | NRE and FCNR(B) | RBI Master Direction No. 14, Schedules 1 and 2 |
| Who may open it | Any person resident outside India | NRO | Schedule 3 |
| Currency of the account | Indian rupees | NRE and NRO | Schedules 1 and 3 |
| Currency of the account | Any permissible foreign currency | FCNR(B) | Schedule 2 |
| Forms allowed | Savings, current, recurring or fixed deposit | NRE and NRO | Schedules 1 and 3 |
| Forms allowed | Fixed deposit only | FCNR(B) | Schedule 2 |
| Tax on interest | Exempt from income tax | NRE | Schedule 1 |
| Tax on interest | Taxable in India | NRO | Schedule 3 |
| Repatriation of the balance | Freely permitted | NRE | Schedule 1 |
| Repatriation of the balance | Up to USD 1 million a financial year, for NRIs and PIOs | NRO | Schedule 3 |
| Joint account with a resident relative | Allowed, on a former-or-survivor basis | NRE | Schedule 1 |
Source: RBI Master Direction No. 14 on Deposits and Accounts, page last updated 5 September 2026. This is the primary instrument. Where a bank’s website disagrees with it, the Master Direction wins.
Why is NRE interest tax-free and NRO interest not?
Because the two accounts hold different money. An NRE balance is foreign earnings brought into India. India does not tax it, and the Master Direction states plainly that interest on NRE balances is exempt from income tax. An NRO balance is Indian income. India taxes Indian income regardless of where the earner lives.
Tax is deducted at source on NRO interest before it reaches you. The rate is the one in force for payments to non-residents under the Income-tax Act, and it is materially higher than the resident rate on a bank deposit. If your country of residence has a tax treaty with India, you may be able to claim a lower rate. That needs a tax residency certificate and Form 10F filed with your bank. Do it before the interest is paid, not after. Our page on NRI taxation goes into the mechanics.
The uncomfortable part: many NRIs leave old resident savings accounts open after moving abroad. That is not permitted. A resident account must be redesignated as NRO once your status changes. Banks rarely chase you about it, which is exactly why it is a problem years later when you try to repatriate.
What can go into each account?
An NRE account takes inward remittances, transfers from other NRE or FCNR(B) accounts, and the proceeds of investments made from it. It also takes current income such as rent, dividend, pension and interest, in the specific cases the Master Direction permits. An NRO account takes inward remittances, your legitimate dues in India, and transfers from other NRO accounts.
Debits are the tighter side. From an NRE account you can make local payments, move money to another NRE or FCNR(B) account, and invest in India. From an NRO account you can make local payments, move money to another NRO account, and remit current income abroad. The USD 1 million a year cap applies to repatriating the balance itself.
When is FCNR(B) worth the trouble?
FCNR(B) is a fixed deposit only. There is no savings or current version. Compare it against the rupee options on our best FD rates page before you commit. You are paid a foreign currency interest rate, which is usually well below the rupee deposit rate, and in exchange you carry no rupee risk.
That trade is worth taking when you are certain the money is going back out. It is a poor trade when the money is destined for a house in India. If you will spend it in rupees, holding it in dollars just adds two conversions. Banks offer FCNR(B) in whole-year tenors; check your bank’s own FCNR rate card for the tenors and currencies it accepts, because the offer varies by bank. Our NRE and NRO FD rates page tracks the rupee side.
What NRIs get wrong about joint accounts
You can hold an NRE account jointly with a resident relative on a former-or-survivor basis. What people miss is the limit on operation. During your lifetime, that resident relative can operate the account only as a power-of-attorney holder. They are not a co-equal operator. An NRO account may be held jointly with residents on a former-or-survivor basis too.
Get the mandate wording right at account opening. Fixing it later usually means closing and reopening.
Frequently asked questions
Can I keep my old resident savings account after becoming an NRI?
No. Once your residential status changes, the account has to be redesignated as an NRO account. Leaving it as a resident account is a breach of the deposit rules, and it creates a repatriation problem later when you cannot show the funds were properly held.
How much can I send out of my NRO account each year?
NRIs and PIOs may repatriate up to USD 1 million per financial year from an NRO balance, under Schedule 3 of RBI Master Direction No. 14. Current income such as rent or a pension can be remitted separately as current income. Your bank will want Form 15CA and 15CB from a chartered accountant.
Is FCNR(B) interest taxed in India?
FCNR(B) follows the NRE framework on credits, debits, joint holding and loans, as the Master Direction states directly. Confirm the tax treatment for your own residency status with a tax adviser before you open one, since it depends on when you become a resident again.
Can I move money from my NRO account to my NRE account?
Within the USD 1 million annual limit, and with the tax paperwork done, yes. It is not an internal transfer your bank will do on a phone call. Treat it as a repatriation with a domestic destination.
Which account should my Indian salary arrears go into?
NRO. The money was earned in India, so it is an Indian due. It cannot be credited to an NRE account whatever your current residency. Sending money the other way, from abroad into India, is covered in our guide to sending money to India.
Sources
- Reserve Bank of India, Master Direction No. 14 on Deposits and Accounts (FEMA), Schedules 1, 2 and 3. rbi.org.in. Page last updated 5 September 2026. Primary source.
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