NRE vs NRO account: which account should an NRI use?
NRI Dash Research Team · Last reviewed: 2026-06-28
NRE and NRO accounts are both held in Indian rupees, but they serve different money flows. NRE accounts are mainly used for eligible overseas earnings remitted to India, while NRO accounts are mainly used for income arising in India, such as rent, pension, dividends or sale proceeds.
Start with the source of money
Use an NRE account mainly for eligible overseas earnings remitted to India — interest is generally exempt from Indian income tax and both principal and interest are generally repatriable. Use an NRO account for income arising in India such as rent, pension, dividend or sale proceeds — interest is generally taxable and repatriation follows additional conditions.
Key points
- NRE — Rupee account for eligible foreign earnings sent to India.
- NRO — Rupee account for income arising inside India.
- Tax and repatriation differ — NRE interest is generally exempt; NRO interest is generally taxable with TDS.
What the account type actually controls
The NRE vs NRO distinction is primarily about the source of the funds, not the account holder's personal tax status alone. Money earned outside India and remitted to India generally goes into an NRE account. Money that arises inside India — rent collected from a tenant, dividends paid by an Indian company, maturity proceeds from a resident-era investment — generally goes into an NRO account.
Both accounts are held in Indian rupees, so the holder carries exchange-rate exposure when converting back. Neither account is a foreign-currency account. FCNR(B) is the foreign-currency deposit product — it holds principal and interest in a permitted foreign currency and eliminates rupee conversion risk during the deposit term.
Five differences that matter for day-to-day decisions
Source of funds: NRE accounts accept overseas remittances; NRO accounts accept India-sourced income and can also accept overseas remittances.
Repatriation: NRE balances are generally repatriable; NRO balances follow current-income and permitted remittance rules including the USD 1 million annual facility.
Tax: NRE interest is generally exempt in India while eligibility is maintained; NRO interest is generally taxable and may have TDS. A DTAA treaty may reduce the NRO TDS rate if you provide a Tax Residency Certificate.
Joint holding: permitted combinations differ, especially when a resident Indian is a joint holder.
Return to India: ask the bank to redesignate accounts when FEMA residential status changes. See the returning to India financial checklist for the full list of steps.
When an existing resident account needs attention
When a resident Indian becomes a person resident outside India under FEMA, an existing resident account should generally be redesignated as an NRO account. This banking classification is separate from income-tax residency, so a move abroad can create two different status checks.
Before moving salary, property proceeds or investment redemptions between accounts, ask the authorised dealer bank which account is permitted for that transaction and what evidence it needs.
Frequently asked questions
Can an NRI keep a normal resident savings account?
No. Under FEMA, a person who becomes resident outside India must redesignate their existing resident savings account as an NRO account or close it. Continuing to operate a resident savings account after moving abroad is a FEMA violation. Ask your bank to update the account designation and your KYC status as soon as your residential status changes.
Can rent from Indian property be credited to an NRE account?
Rent collected from an Indian property is India-sourced income and must go into an NRO account, not an NRE account. NRE accounts are intended for eligible overseas earnings remitted to India. Crediting India-sourced rental income to an NRE account may be flagged by the bank and is not permitted under RBI guidelines.
Is an NRE account free from exchange-rate risk?
No. NRE accounts are denominated in Indian rupees. The rupee value is guaranteed by the deposit rate, but when you convert the balance back to USD, GBP, AED or another currency, the exchange rate determines what you actually receive. A weaker rupee at the time of conversion reduces the foreign-currency value of your NRE balance.
Is NRE vs NRO the same as NRE FD vs NRO FD?
No, but they are related. NRE and NRO refer to the type of bank account — defined by the source of funds and tax treatment. An NRE FD or NRO FD is a fixed deposit opened within that account framework. The rules for the underlying account (tax exemption for NRE, TDS for NRO, repatriation conditions) apply to the fixed deposits held within each account type.