Indian banks offer three main NRI bank account types: the NRE (Non-Resident External) account for money earned abroad, the NRO (Non-Resident Ordinary) account for income that originates in India, and the FCNR(B) (Foreign Currency Non-Resident) term deposit for holding savings in a foreign currency. Each one treats tax, repatriation, and currency differently, and picking the wrong one can mean paying tax you could have avoided or finding your money stuck when you want to move it abroad.
Who the Rules Apply To
Under the Foreign Exchange Management Act, you are a Non-Resident Indian if you are an Indian citizen living outside the country for employment, business, or any other purpose that suggests an indefinite stay abroad. In practice, your status flips to non-resident once you spend fewer than 182 days in India during a financial year, which runs April 1 through March 31. The same banking rules extend to Overseas Citizens of India, who hold foreign passports but have Indian heritage through parents or grandparents.
One change matters for 2026: Person of Indian Origin cards are no longer valid. PIO cards expired on December 31, 2025, and the conversion window has closed. If you held a PIO card, you now need to apply for a fresh OCI card through the Indian Embassy or Consulate before you can open or maintain NRI bank accounts.1Embassy of India, Washington DC, USA. Conversion of PIO Card to OCI Card
NRE Account: For Money Earned Abroad
An NRE account is where you deposit money you earn outside India. Your foreign currency is converted to Indian Rupees at the prevailing exchange rate when it hits the account.2ICICI Bank. Decoding NRE, NRO and FCNR (B) Accounts for NRIs Two features make this account the default for most NRIs. Interest is completely exempt from Indian income tax under Section 10(4)(ii) of the Income Tax Act, and both principal and interest are fully repatriable with no cap.3Income Tax Department, India. Non-Resident – Benefits Allowable You can move funds freely between the NRE account and your overseas bank without regulatory filings or transfer limits.4HSBC India. NRE Account Explained: Meaning, Uses and Advantages
NRE accounts can be held jointly with other NRIs or OCI holders. A resident Indian relative can also be added, but only on a “former or survivor” basis, meaning the resident can access the account only after you pass away, not during your lifetime.2ICICI Bank. Decoding NRE, NRO and FCNR (B) Accounts for NRIs
The restriction to understand clearly: an NRE account is for foreign earnings only. Rent from an Indian flat, dividends from Indian shares, or a pension from a former Indian employer cannot go in here. That income belongs in an NRO account.
NRO Account: For Income That Originates in India
An NRO account handles money that comes from Indian sources. Rental income, corporate dividends, pension payments, matured insurance proceeds, and any other earnings tied to Indian assets flow into this account type. Unlike NRE accounts, interest is fully taxable under Indian income tax law.
Banks withhold tax at source on NRO interest at a base rate of 30%, plus the 4% health and education cess, which brings the effective withholding to roughly 31.2%. If you live in a country that has a Double Taxation Avoidance Agreement with India, you can often reduce this rate by giving the bank a Tax Residency Certificate from your country of residence. The U.S.-India tax treaty, for instance, lets U.S. residents claim a foreign tax credit on their American return for taxes already paid to India.5Internal Revenue Service. Tax Convention with the Republic of India
Repatriation from an NRO account is capped at $1 million per financial year, covering principal and interest combined.6Ujjivan Small Finance Bank. Understanding NRO Account Repatriation Rules Moving money out also requires specific paperwork: Form 15CA, a self-declaration of payment details, and Form 15CB, a certificate from a Chartered Accountant confirming your tax obligations have been met. That compliance step adds cost and time to every transfer, which is why NRIs earning abroad generally keep foreign savings in an NRE account instead.
FCNR(B) Deposit: Foreign Currency, Fixed Term
FCNR(B) accounts let you hold funds in a foreign currency without converting to Rupees, which eliminates exchange rate risk for the life of the deposit. The Reserve Bank of India permits deposits in six currencies: U.S. Dollars, British Pounds, Euros, Canadian Dollars, Australian Dollars, and Japanese Yen.7Reserve Bank of India. Master Circular – Foreign Currency Non-Resident (FCNR(B)) Accounts
These are fixed-term deposits only. The minimum lock-in is one year and the maximum is five years.7Reserve Bank of India. Master Circular – Foreign Currency Non-Resident (FCNR(B)) Accounts Interest is exempt from Indian income tax, and both principal and interest are fully repatriable at maturity.8HDFC Bank. FCNR Deposit – Features Because the funds stay in foreign currency throughout, you avoid conversion fees and exchange margins entirely.
There is no liquid withdrawal option. Break the deposit before one year and you forfeit all interest, and the bank may charge a penalty to cover its swap costs.9Reserve Bank of India. FCNR(B) Deposit Guidelines That penalty should be disclosed when you open the deposit. Minimums vary by bank and currency. At HDFC Bank, for example, the minimum is $1,000 for USD and CAD deposits and £2,500 for GBP deposits.8HDFC Bank. FCNR Deposit – Features
Which Account Should You Open
The choice comes down to where the money comes from and what you want to do with it.
- Open an NRE account for salary or business income earned abroad that you want to save in India tax-free, with the flexibility to send it back any time without caps.
- Open an NRO account for Indian-source income like rent, dividends, or a pension. Interest is taxable and repatriation is limited to $1 million per financial year.
- Open an FCNR(B) deposit for a lump sum you want to shield from Rupee depreciation. Tax-free and fully repatriable, but locked for at least one year.
Most NRIs end up holding both an NRE and an NRO account. The NRE handles foreign earnings and keeps everything flexible; the NRO collects any Indian income you cannot avoid. FCNR(B) sits alongside as a more specialized tool for people who want the safety of foreign currency inside an Indian bank.
What You Need to Open an Account
Every Indian bank requires Know Your Customer documentation. The checklist varies slightly between banks, but the core is consistent:
- Identity proof: a valid Indian passport for Indian citizens, or a valid foreign passport with an OCI card for overseas citizens of Indian origin.10HDFC Bank. Acceptable List of KYC Documents for Non-Resident Indians
- NRI status proof: a valid work visa, residence permit, permanent resident card, or student visa showing you live outside India.
- Overseas address proof: a recent utility bill, bank statement, or lease agreement with your current foreign address.
- PAN card or Form 60. A Permanent Account Number is mandatory; if you do not have one, Form 60 serves as a declaration.10HDFC Bank. Acceptable List of KYC Documents for Non-Resident Indians
- Two to four recent passport-sized photographs.
- Your foreign tax identification number, required under the Common Reporting Standard.
Document copies have to be attested before the bank will accept them. India and the United States are both signatories to the Hague Apostille Convention, so a document apostilled by a U.S. state authority is legally entitled to recognition in India without further Consulate attestation.11Consulate General of India, Houston. Attestation of Power of Attorney or Civil or Agricultural or Commercial Documents In practice, some Indian banks still ask for Consulate attestation on top of the apostille, so getting both done avoids a bounced application. Verification after the bank receives your documents typically runs one to three weeks.
U.S. Tax Reporting You Cannot Skip
Opening an Indian bank account as a U.S. taxpayer triggers federal reporting that many NRIs overlook. Penalties for missing these filings are often far larger than any tax you would have owed.
FBAR (FinCEN Form 114)
If the combined balance of all your foreign financial accounts exceeds $10,000 at any point during the calendar year, you must file a Report of Foreign Bank and Financial Accounts with the Financial Crimes Enforcement Network.12Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) That includes every NRE, NRO, and FCNR(B) account you hold, whether or not they produced taxable income. The deadline is April 15 with an automatic extension to October 15. The form is filed electronically through the BSA E-Filing system, not with your tax return.p>
Penalties are steep. A non-willful violation can carry a fine of up to $16,536 per form. A willful violation jumps to the greater of $165,353 or 50% of the account balance, assessed per account per year.
FATCA (Form 8938)
The Foreign Account Tax Compliance Act imposes a separate reporting obligation on Form 8938, filed with your income tax return. The thresholds are higher than FBAR and depend on your filing status and where you live:13Internal Revenue Service. Do I Need to File Form 8938, Statement of Specified Foreign Financial Assets
- Single, living in the U.S.: total foreign assets exceed $50,000 on the last day of the tax year or $75,000 at any time during the year.
- Married filing jointly, living in the U.S.: $100,000 on the last day or $150,000 at any time.
- Single, living abroad: $200,000 on the last day or $300,000 at any time.
- Married filing jointly, living abroad: $400,000 on the last day or $600,000 at any time.
FBAR and FATCA are separate requirements. Meeting one does not excuse you from the other.
Credit for Indian Taxes Paid
If your NRO interest is subject to Indian withholding, you can claim a foreign tax credit on your U.S. return through IRS Form 1116, which the U.S.-India tax treaty specifically provides for.5Internal Revenue Service. Tax Convention with the Republic of India NRE and FCNR(B) interest, while exempt from Indian tax, is still reportable as income on your U.S. return. The Indian exemption does not carry over to U.S. tax law.
If You Move Back to India
When you return to India permanently, your NRI accounts cannot keep operating as before. The obligation kicks in as soon as your residential status changes under FEMA, not when you file taxes or notify the bank months later.
Your NRE account must be converted to a regular resident savings account immediately on return, or the balance can be moved into a Resident Foreign Currency account if you want to keep the funds with repatriable status. FCNR(B) deposits can run undisturbed until maturity at the contracted interest rate, after which the proceeds move into either a resident Rupee account or an RFC account at your choice. NRO accounts are redesignated as regular resident accounts. The Resident Foreign Currency account is worth a closer look, because it preserves your ability to use the funds for transactions in India or abroad without the restrictions that apply to regular resident accounts.14Reserve Bank of India. Foreign Currency Accounts by Resident Individuals
Ignoring the conversion rule is genuinely risky. Under Section 13 of FEMA, penalties for operating the wrong account type can reach up to three times the account balance, with an additional daily penalty of ₹5,000 accruing from the first day of non-compliance, and banks can freeze accounts without warning once they discover the mismatch.15India Code. Foreign Exchange Management Act, 1999 Tell your bank as soon as you know you are moving back.