Chartered Accountant · ICAI M.No. 153926 · FRN 136869W
NRE and FCNR — tax-free
NRE (Non-Resident External) holds foreign earnings in rupees; its interest is exempt and the balance is fully repatriable. FCNR (Foreign Currency Non-Resident) is a term deposit held in foreign currency — useful to avoid rupee fluctuation — and its interest is also exempt while you are non-resident.
NRO — taxable
NRO (Non-Resident Ordinary) is for income arising in India — rent, dividends, pension. Its interest is fully taxable, with TDS around 30% plus surcharge and cess (a DTAA can reduce it), and repatriation is capped at USD 1 million a year.
Which to use — an example
Example: your overseas salary should go to NRE (tax-free, freely repatriable); your Mumbai flat’s rent must go to NRO (taxable). If you want a currency hedge on a large foreign sum, an FCNR deposit keeps it in dollars. Matching the right account to the right money keeps your tax and repatriation simple. A common and costly mistake is letting Indian rent or dividends land in an NRE account — that money belongs in NRO, and mixing it can create FEMA issues and muddle your tax. The simple discipline is: foreign money in, NRE or FCNR; Indian income in, NRO. Tax treatment is tied to FEMA status — confirm yours. Our NRI & FEMA service can set them up.