NRE vs. NRO Accounts: The Money-Transfer Setup Every NRI Needs

Once you're earning in dollars, you'll want to send money to India — for family, savings, or investments. Doing it cleanly starts with understanding two account types: NRE and NRO.

NRE vs NRO at a glance

Your US-earned savings should land in NRE if you want flexibility; India-origin income has to go to NRO.

"Tax-free" means tax-free in India only

This is the single most expensive misunderstanding in the table above, and it catches people for years at a time.

NRE interest is exempt from Indian tax so long as you meet the nonresident conditions the exemption is given on. It is not exempt from US tax. A US tax resident is generally taxed on worldwide income, so NRE interest — and NRO interest — belongs on your US return like any other interest. With NRE there is the additional sting that because India collected nothing, there is no foreign tax credit to offset the US liability. An NRE fixed deposit paying 7% is, to the IRS, a taxable 7%.

NRO interest is taxable in both countries — but there you have paid Indian tax, so the foreign tax credit can relieve the double charge, subject to the usual limitation rules on how much credit you can actually use.

Repatriation: NRE is one rule, NRO is two

Money in NRE can go back to the US whenever you want it, in any amount, without a cap. That is the whole point of the account.

NRO is where people go wrong, because it is governed by two different rules and the popular summary collapses them into one.

So the common claim that "you can only take USD 1 million a year out of an NRO account" is wrong as a general statement. It describes the remittance-of-assets facility. Ordinary current income sits outside it.

The paperwork is event-based, not automatic

It is equally wrong to say that Forms 15CA and 15CB are always both required. What applies depends on the remittance and on Rule 37BB:

• Form 15CA is the remitter's information return, and it has four parts. Which one you use turns on whether the remittance (or the year's aggregate) exceeds ₹5 lakh, whether it is chargeable to tax at all, and whether an order or certificate has been obtained from the Assessing Officer.
• Form 15CB, the accountant's certificate, is event-based — it is required where the ₹5 lakh threshold is crossed and the Part C route applies, not on every transfer.
• Some remittances fall outside Form 15CA altogether under Rule 37BB(3), including certain remittances by an individual that need no prior RBI approval and those falling within the specified list of purposes.

Your bank will tell you which route it needs before it will process the transfer. Work through the 15CA/15CB checklist first so you are not assembling a certificate you may not need — or discovering late that you do.

Both accounts are reportable to the IRS

Neither account is invisible, and the reporting obligation is separate from the tax one. A US tax resident generally reports the interest from both NRE and NRO accounts as part of worldwide income, and may in addition have FBAR and Form 8938 filing obligations once the relevant thresholds are met. Indian banks report US-person accounts under FATCA, so the information arrives whether you file or not.

The trigger is aggregate balances across all your foreign accounts, so opening a second account does not halve the problem. Check whether you have crossed the thresholds, and see the FBAR and FATCA guide for how the two filings differ.

What happens to these accounts when you move back

Both are non-resident accounts. Once you return to India and become a resident again, they stop being the right accounts to hold, and the bank will expect you to act:

• NRO is redesignated as a resident savings account.
• NRE is redesignated too — or converted to an RFC (Resident Foreign Currency) account, which lets you keep the balance in foreign currency instead of converting it to rupees at whatever the rate happens to be on the day you land.

That RFC option is worth knowing about before you fly, because it is a currency decision disguised as a banking formality. See Retirement & Return to India for where it sits in the wider sequence.

If you are moving in the other direction — becoming an NRI and holding a resident account you opened years ago — that has its own process, covered in converting a resident account to NRE/NRO. You are not allowed to simply keep using the resident account.

Getting money into them cheaply

The account decides where the money can go next; the transfer service decides how much of it arrives. Those are separate problems, and the second one has its own guide — compare the amount that lands rather than the advertised fee, because a "zero fee" transfer at a poor rate costs more than a small flat fee at the mid-market rate. The cheapest ways to send money from the USA to India works through the comparison properly.

Frequently asked questions

Can I put my US salary into an NRO account?

You can, and it is usually the wrong choice. Once it is in NRO it is subject to the repatriation cap and the 15CA/15CB certification if you ever want it back in dollars, and the interest attracts Indian TDS. Foreign earnings belong in NRE, where none of that applies.

Is NRE interest really tax-free?

In India it is exempt, but conditionally: the exemption depends on your satisfying the nonresident conditions attached to it, broadly being a person resident outside India under FEMA or otherwise permitted to hold the account. In the US it is not exempt at all. For a US tax resident it is ordinary interest income on the US return, and because India withheld nothing there is no foreign tax credit to reduce the bill. Any comparison of an NRE deposit against a US account has to be made after US tax.

How much can I send out of my NRO account?

It depends on what the money is. Current income — rent, dividends, interest, pension — is repatriable freely, net of applicable taxes, and is not counted against any annual ceiling. Balances and other eligible assets, including assets received by inheritance, sit within the USD 1 million per financial year remittance-of-assets facility. The documentation is event-based rather than universal: Form 15CA applies in one of four parts depending on the amount, the taxability and whether an Assessing Officer order has been obtained, Form 15CB is required only where the ₹5 lakh threshold and the Part C route apply, and some remittances are outside Form 15CA altogether under Rule 37BB(3). Ask your bank which route your specific transfer needs.

Can my parents in India operate my NRO account?

An NRO account can be held jointly with a resident, which is the usual arrangement for family who manage day-to-day payments. An NRE account is different: a resident close relative can be a joint holder only on a "former or survivor" basis, meaning they can operate it only after you. Confirm the current position with your bank, as the operating conditions are set by RBI rules rather than by the bank.

Do I need to close these accounts when I return to India?

Not close — redesignate. NRO becomes a resident account, and NRE is either redesignated or converted to an RFC account that holds the balance in foreign currency. Doing nothing is not an option: continuing to run a non-resident account after you have become resident is a compliance problem, not an oversight.

Official sources

Every rule above comes from one of these. Where a figure matters to a decision, read the source rather than this page — the account rules come from the RBI under FEMA, and the tax and documentation rules from the Income Tax Department.

• RBI — Accounts in India by non-residents (FAQs)
• RBI — Master Circular on Non-Resident Ordinary (NRO) Rupee Accounts
• RBI — Master Circular on Remittance Facilities for Non-Resident Indians / PIOs
• Income Tax Department — Rule 37BB
• Income Tax Department — Form 15CA FAQs
• Income Tax Department — Form 15CB FAQs
• IRS — Report of Foreign Bank and Financial Accounts (FBAR)
• IRS — Basic questions and answers on Form 8938

Get this scaffolding in place early and every future transfer becomes a two-minute task instead of a research project.