NRI workflow
NRE or NRO — and does it matter?
It matters more than any rate: the account type decides whether interest is taxable and whether the balance can leave India freely. Answer four questions, then read the conditions.
The three accounts, in one line each
- NRE — overseas earnings held in rupees. Interest exempt under section 10(4)(ii); balance repatriable.
- NRO — rupees earned in India (rent, pension, dividends). Interest taxable; remittance conditional on tax settled and the USD 1 million per financial year facility.
- FCNR(B) — foreign-currency term deposit, useful when you want to hold the currency and fix the exchange rate for the deposit term.
Run the chooser
Account mix your answers point to
No NRI account needed yet
- With no Indian income and no overseas money to bring in yet, you may not need an NRI account at all today — open one when the need appears, not before.
Conditions that decide the outcome
- An NRI account opened and left dormant still attracts minimum-balance and re-KYC obligations.
- LRS is for residents. NRIs cannot use the USD 250,000 LRS route — do not plan around one limit for the other person's rule.
RBI — accounts in India by non-residents · educational tool, not advice. Confirm your residency position and paperwork with your bank.
The rule people mix up
Residency decides which rulebook applies — and it is not a matter of convenience.
LRS is a resident facility: RBI frames it for resident individuals at USD 250,000 per financial year. An NRI is not a resident for that purpose, so LRS limits are irrelevant to them — and the USD 1 million per financial year remittance facility for eligible balances is what actually governs money leaving an NRO balance, subject to taxes already settled and the bank's documentation.
FEMA residency and income-tax residency are related tests but not the same test, and the NRE interest exemption follows FEMA status. That is why banks ask for proof of overseas residency when the account is opened, and why returning to India triggers a re-designation exercise rather than a simple address change.
Questions we get asked
Can an NRI use the Liberalised Remittance Scheme?
No. RBI states LRS is for resident individuals, up to USD 250,000 per financial year. An NRI moves money under FEMA rules instead — the USD 1 million per financial year facility for eligible NRI/PIO balances and other eligible assets is the one people confuse with it, and it is conditional on RBI conditions and the bank's documentation.
Is NRE interest really tax-free?
Interest on NRE balances is exempt under section 10(4)(ii) while you are a person resident outside India under FEMA. The exemption ends when you become resident, and it never covered the investments you buy with the money — only the account interest.
What happens to my NRE and NRO accounts when I return to India?
They are re-designated to resident accounts under FEMA, and the NRE interest exemption stops applying once you are resident. Plan the re-designation with your bank rather than discovering it at the branch — and remember that FEMA and income-tax residency are related but separate tests.
Do I need both an NRE and an NRO account?
Only if money flows both ways: NRO for rupees you earn in India (rent, pension, dividends, interest) and NRE for overseas earnings you bring in. If you have just one of those, one account is enough — and if you have neither yet, the honest answer is that you may not need an NRI account today.
Next: the repatriation & TCS checklist →
Sources
- RBI — Accounts in India by non-residents (FAQ)NRE/NRO account rules and the USD 1 million per financial year remittance facility for eligible NRI/PIO balances and other eligible assets (conditional on RBI conditions and bank documentation).
- RBI — Liberalised Remittance Scheme (FAQ)LRS is available to resident individuals only, up to USD 250,000 per financial year.
- Income Tax Department — NRE and NRO account interest taxabilityInterest on NRE balances is exempt under section 10(4)(ii); NRO interest is taxable in the hands of the NRI.
Reviewed 2026-09-24. Educational content, not personalised advice.