Decoding NRE, NRO, and FCNR accounts

Decoding NRE, NRO, and FCNR accounts for Non-Resident Indians

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Types of bank accounts/deposits offered to NRIs.
Features, eligibility, and differences between accounts.

OPEN AN NRI BANK ACCOUNT

_{The below content is purely for informational purposes and is not intended to constitute advisory of any kind. The position reflected in this article has been updated as of August 18, 2023.}

As a Non-Resident Indian (NRI), you may want to transfer money back home to your family or continue with your investments or other banking needs in India. Indian banks offer you a variety of banking accounts to choose from as per your financial requirements. To open these accounts, you must be a Non-Resident Indian (NRI)/ Person of Indian Origin (PIO) / Overseas Citizen of India (OCI) as per the prevailing Foreign Exchange Management Act (FEMA) guidelines.

NRE (Non-Resident External), NRO (Non-Resident Ordinary), and FCNR (Foreign Currency Non-Resident) are three types of bank accounts/deposits offered to NRIs.
These accounts facilitate a seamless transfer and accessibility of funds within India and overseas.
In this article, you can know more about the features, eligibility, and critical differences between NRE, NRO, and FCNR to determine which one(s) best suits your financial requirements.

Did you know?

Once you become an NRI, having an NRO or NRE account is neccesary if you want to invest money in India and/or deposit income generated in India in Indian Rupee

Outlining NRE, NRO and FCNR bank accounts

NRE account (Non-Resident External account): It is a type of bank account that you can open in India as an NRI. It is an Indian Rupee (INR) denominated account, i.e. it is maintained in Indian Rupee, and you can use it to deposit funds that you earn abroad in a foreign currency. The bank uses the prevailing exchange rate to convert your foreign currency funds into Indian rupees and deposit it into your account. It is suitable for those who want to use their foreign earnings to handle expenses in India. A key benefit of an NRE bank account is that you can freely repatriate, i.e., transfer the funds to overseas account without any limits. The repatriable funds include both the principal amount and the interest earned in this account. Furthermore, the interest earned on the money deposited in this account is tax-free (no income tax, wealth tax or gift tax) in India.

Open an NRE Bank Account

NRO account (Non-Resident Ordinary account): It is yet another bank account that you as an NRI can open in India. It is also a Rupee denominated account that you can use to deposit income earned in India such as rent, dividends, pensions, gifts and proceeds from sale of immovable property received in India. The account is suitable for NRIs who want to use income earned in India to manage their expenses in India. Funds deposited in your NRO bank account can be classified as:

Current income: It includes rental income, dividend from investments, pension, interest from fixed deposits (FD) and bank accounts, among others. The funds from current income are freely repatriable without any limit.
Capital income: It includes proceeds from maturity of FD, sale of property, redemption of mutual funds, shares, fund transfers from your NRO account to NRE account. The interest earned in an NRO account is taxable in India. You can repatriate capital funds up to USD 1 million per financial year, cumulatively for all your NRO accounts held in India.

Open an NRO Bank Account

Did you know?

A resident savings account can be converted only to an NRO account. When your resident savings account is converted to NRO account, the balance in your NRO account is classified as capital income, and repatriation is permitted up to USD 1 million per financial year (subject to prevailing FEMA regulations).

FCNR bank account (Foreign Currency Non-Resident account): It lets you maintain a fixed deposit in India in foreign currency. Like an NRE bank account, the funds in this account and the interest earned are tax-free in India and are freely repatriable with no limits.

Open an FCNR Bank Account

Account features and permissible transactions for NRE/NRO/FCNR accounts

Parameters	NRE	NRO	FCNR
Account maintained in	₹	₹	Foreign currency
Deposit currency	Indian Rupee and Foreign currency (basis conversion at applicable rates)	Foreign currency (earned overseas) and transferred from an overseas account and converted to ₹ (basis conversion at applicable rates) or ₹ in case of transfer from another NRE account.	Foreign currency
Withdrawal currency	₹	₹	Foreign currency
Interest earned	Interest is taxable in India	Tax-free in India	Tax-free in India
Type of accounts	Savings Current Recurring deposit Fixed deposit	Savings Current Recurring deposit Fixed deposit	Fixed deposit
Joint holding	Can be held with two or more NRIs/PIOs. And Can be held on a ‘former or survivor’* basis with a resident Indian	Can be held jointly with two or more NRIs/PIOs. And Can be held on a ‘former or survivor, basis with a resident Indian relative*	Can be held with two or more NRIs/PIOs. And Can be held on a ‘former or survivor, basis with a resident Indian relative.*
Power of Attorney (PoA)***	Permitted	Permitted	Permitted
Other Aspects
Permitted payments and transfers	Payments in India Outward remittance of current income without limit. Outward remittance of capital funds (up to USD 1 million per financial year) Transfers to other NRO accounts	Payments in India Outward remittances Transfer to other NRE/ FCNR (B) accounts and investments in India.	Disbursements in India Outward remittances Transfer to other NRE/FCNR accounts and investments in India.
Repatriation	For current income, freely repatriable without limit. For capital funds, permitted up to USD 1 million per financial year	Freely repatriable	Freely repatriable

* The term ‘former’ or ‘survivor’ basis refers to the condition where only one of the two joint account holders that is the former account holder can primarily operate the account. The ‘Survivor’ can only operate the account after the ‘Former’ passes away. ** Relative is defined under section 2 (77) of the Companies Act, 2013. This includes their parents (including stepparents), son (including stepson), son’s wife, daughter, daughter’s husband, siblings (including stepsiblings), and children. ***Reserve Bank of India: Master Directions- Deposits and Accounts

Conclusion

In summary, the NRE, NRO and FCNR (B) accounts serve specific purposes and offer different advantages. An NRI should choose which to maintain basis their needs.

Frequently Asked Questions

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What types of account can an NRI open?

According to the guidelines issued by the Foreign Exchange Management Act (FEMA), the Reserve Bank of India (RBI) allows an NRI to open two types of savings bank accounts with authorised dealers and banks – a Non-Resident External Rupee Account (NRE) and a Non-Resident Ordinary Rupee (NRO) account.

Besides these two options, if an NRI wishes to deposit a lump sum in a term deposit at a stipulated maturity rate in a foreign currency, they can also open an FCNR (Foreign Currency Non-Resident) deposit account. If an NRI wishes to deposit a lump sum in a term deposit at a stipulated maturity rate in INR they can open a fixed deposit or recurring deposit from funds held in their NRO or NRE account.

Can a resident Indian be a joint holder?

Yes, any resident Indian can be a joint holder in an NRO account. However, only a resident relative2 can be a joint holder in the NRE/FCNR account.

For detailed information for joint account for the NRI, click here.

Can an NRE/NRO account be opened online?

Yes, NRIs can open both NRE and NRO account online (in case the channel is available with your bank). Click here to know how to open an ICICI Bank NRE or NRO account.