Detailed Comparison of NRO, NRE, and FCNR Accounts
For Non-Resident Indians (NRIs), choosing the right type of bank account in India is essential for managing income, investments, and remittances. The three main types of NRI bank accounts are:
- NRO (Non-Resident Ordinary) Account – For managing income earned in India.
- NRE (Non-Resident External) Account – For holding foreign income in Indian Rupees.
- FCNR (Foreign Currency Non-Resident) Account – For holding foreign income in foreign currency as fixed deposits
This guide provides a detailed comparison of these accounts, covering their features, benefits, tax implications, repatriation rules, and which one is best suited for different financial needs.
Key Differences Between NRO, NRE, and FCNR Accounts
| Feature | NRO Account | NRE Account | FCNR Account |
| Purpose | Manage income earned in India | Hold foreign earnings in INR | Hold foreign earnings in foreign currency |
| Account Type | Savings, Current, Fixed Deposit | Savings, Current, Fixed Deposit | Fixed Deposit only |
| Deposit Currency | INR & foreign currency (converted to INR) | Only foreign currency (converted to INR) | Foreign currency (USD, GBP, EUR, etc.) |
| Withdrawal Currency | INR | INR | Foreign currency |
| Tax on Interest Earned | Taxable in India | Tax-free in India | Tax-free in India |
| Repatriability (Fund Transfer Abroad) | Limited – up to $1 million per year with documentation | Full – Principal & interest freely repatriable | Full – Principal & interest freely repatriable |
| Best For | NRIs with rental income, dividends, pension, or business in India | NRIs who want to transfer foreign earnings to India tax-free | NRIs who want to save in foreign currency and avoid exchange rate risks |
| Joint Account Holding | Allowed with another NRI or a resident Indian | Allowed with another NRI (not with resident Indian) | Allowed with another NRI (not with resident Indian) |
| Loan Facility | Available against deposit | Available against deposit | Available against deposit |
| Currency Exchange Risk | No | Yes (Foreign earnings converted to INR) | No (Remains in foreign currency) |
| Minimum Tenure (For Fixed Deposit Accounts) | 7 days | 1 year | 1 year |
| Maximum Tenure | No limit | No limit | 5 years |
Tip: If you don’t need immediate INR funds and want to protect savings from currency depreciation, FCNR is the best choice.
Taxation on NRO, NRE, and FCNR Accounts
| Tax Type | NRO Account | NRE Account | FCNR Account |
| Income Tax on Interest | Yes (Taxable) | No (Tax-free) | No (Tax-free) |
| TDS (Tax Deducted at Source) | Yes (30% on interest earned) | No TDS | No TDS |
| Wealth Tax | No | No | No |
| Gift Tax | No | No | No |
Tip: If you hold an NRO account, you can claim a DTAA (Double Taxation Avoidance Agreement) benefit to lower tax liability in your country of residence.
How to Choose the Right Account?
| You Should Open | If You… |
| NRO Account | Earn rental income, dividends, pension, or have any other income sources in India. |
| NRE Account | Want to send foreign earnings to India and withdraw in INR, with tax-free interest. |
| FCNR Account | Want to hold savings in foreign currency and avoid INR depreciation risks. |
Which Account Is Best for Different Scenarios?
| Scenario | Recommended Account |
| You live abroad but earn rental income in India | NRO Account |
| You want to send money from the UK/USA to India tax-free | NRE Account |
| You want to invest in Indian fixed deposits with foreign earnings | NRE or FCNR Account |
| You need a joint account with an Indian resident | NRO Account |
| You are unsure when you’ll return to India and want to keep money in foreign currency | FCNR Account |
Conclusion: Which Account Should You Open?
- If you earn money in India, open an NRO account.
- If you earn money abroad and want tax-free savings in INR, open an NRE account.
- If you want to keep your funds in foreign currency and avoid INR fluctuations, open an FCNR account.
- Best Option: Most NRIs maintain both NRO and NRE accounts to handle Indian and foreign earnings separately. If you want long-term foreign currency savings, an FCNR account is a great additional option.
- Final Tip: Choose a bank that offers competitive interest rates, easy online fund transfers, and low remittance fees for the best experience.
- Additional Content & Insights
Currency Options for FCNR Accounts
Common foreign currencies allowed for FCNR deposits include:
- US Dollar (USD)
- British Pound (GBP)
- Euro (EUR)
- Japanese Yen (JPY)
- Australian Dollar (AUD)
- Canadian Dollar (CAD)
Tip: Choose a currency based on your income and risk preference. USD-based FCNRs are the most popular.
Account Opening Process (Step-by-Step)
- Select the Bank: Choose a bank offering competitive rates and digital services.
- Fill the Application Form: Available online/offline for NRE/NRO/FCNR accounts.
- Provide KYC Documents: Passport, visa, address proof, NRI status proof, etc.
- Submit & Verify: Submit documents in person or via courier (depending on the bank).
- Initial Funding: Fund the account as per bank’s minimum requirement.
- Start Using the Account: Enjoy online access, fund transfer, and deposit options.
Digital Services & Benefits
Modern banks offer:
- 24×7 Internet & Mobile Banking
- Instant Money Transfers via SWIFT
- Fixed Deposit booking online
- Monthly interest payout options
- Dedicated NRI customer service
Regulatory Guidelines
- All NRI accounts are governed by the Foreign Exchange Management Act (FEMA).
- RBI regulations mandate that you must convert resident accounts to NRO if your residential status changes to NRI.
- Repatriation of NRO funds requires Form 15CA & 15CB (from a Chartered Accountant).
Common Mistakes to Avoid
- Maintaining resident accounts after becoming an NRI (non-compliance).
- Transferring foreign income into NRO (causing tax liability)
- Ignoring repatriation documentation requirements.
- Not comparing interest rates across banks.
Pro Tip: Multi-Account Strategy
- NRO: Manage India-based income, pay bills, invest in mutual funds.
- NRE: Build INR-based savings, invest in FDs and real estate.
- FCNR: Diversify risk with stable foreign currency holdings.