NRE vs. NRO vs. FCNR: Choose the Right NRI Account

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NRE vs. NRO vs. FCNR: Which NRI Account is Right for You

NRE vs. NRO vs. FCNR: Which NRI Account is Right for You

17 January 2022
NRE vs. NRO vs. FCNR: Which NRI Account is Right for You
17 January 2022

More than 1.33 crore Indians are living abroad, according to data of the Ministry of External Affairs, India. Most of them have continuous money transactions in India. For example, they might have some kind of investment or send money to their family living in India. Therefore, it is important to have an NRI account with a bank in India to facilitate such kinds of transactions.

Here we will know about NRI accounts such as NRE account, NRO account, and FCNR account.


Who is an NRI?

NRI or Non-Resident India is generally referred to as an Indian who lives abroad. Simply put, they are Indians by birth but are not a resident of India. There are many rules set for money transfer services from outside India.

The Income Tax Act 1961 (Section 6) states that an Indian citizen is considered to be a Resident of India if they have stayed in India for a minimum of 182 days during the previous fiscal year (the financial year that runs from the 1 April of the existing year to the 31 March of the following year) or stayed for 60 days in the current year and minimum of 365 days in the previous year.

However, if you are not covered by two conditions from these conditions, you can be given the status of NRI for the previous fiscal year.

In other words, if an Indian citizen lives abroad for a total of 183 days in a fiscal year, they are deemed to be NRI.

What is NRI Account?

To have an NRI account in India, the candidate should be outside of the nation (India) for at least 120 days in a particular year, and also live in India for less than 365 days for the past 4 years combined. One more thing—they should NOT be covered by any criteria of an Indian Citizen.

Another way to become NRI is when a person leaves the nation for job opportunities. This helps them gain the NRI status.

NRI accounts have been categorized into three types with each of them having specific criteria. Therefore, make sure to read the terms and conditions before choosing the one. A person can deposit the money they gain from their existing residing nation or the amount they earn from India. But the selection of an NRI account is key here.

What are the Types of NRI Account?

There are three types of NRI accounts namely NRE account, NRO account, and FCNR account.


NRE or Non-Residential External is meant for depositing the earnings that come from the NRI’s current nation of residence. However, the NRE account requires the earnings to be denominated or converted in Indian Rupees.

For instance, a person works in the US and sends money to their parents back in India. The deposit, says 2000 USD, every month should be denominated in Indian currency. Based on the current exchange rate, the dollar will be converted into Indian rupees. So, if one USD=74.23 INR, meaning that the deposit would be 1,48,462.40 INR on conversion.


  • The balance is converted into Indian currency.
  • The amount is tax-free and repatriable
  • It offers 4.35 percent interest per annum


NRO stands for Non-Resident Ordinary Account and is used to deposit money earned in India such as rent, pension, dividend, return of equity, etc. However, the money is held in Indian Rupees.


  • Withdrawals are allowed in Indian Rupees
  • The account holds all the earnings made in India
  • The repatriate limit is 1 million USD for every financial year
  • The account automatically converts foreign currency if deposited in it.
  • It offers up to 5.5 percent interest per annum


FCNR stands for Foreign Currency Non-Residential Accounts and lets NRIs deposit foreign currency and is converted in the currencies approved by RBI. The listed currency conversions are Canadian Dollars, US Dollar, EURO, Australian Dollar, Hong Kong Dollar, Great Britain Pound, Singapore Dollar, Japanese Yen, and Swiss Franc.

It means that if you earn in one of these listed currencies, there will be no conversion. Otherwise, it will be converted if the deposited money is earned in any other currency.


  • The deposit and the interest generated are repatriable.
  • Money can be held in various currencies in the FCNR account.
  • The deposits come with a tenure range of 1-5 years.
  • No tax is imposed on the deposits.

What If You Return to India? What Can Happen to Your NRI Account?

Once you move to India, you will be considered an Indian resident, meaning that you won’t be holding NRI bank accounts or even enjoy benefits from NRI investments any longer. That’s why you should convert or close your NRE account once you return to India.

If you don’t convert your NRE account within three months of your return, it may violate the guidelines of the Foreign Exchange Management Act (FEMA) and attract a penalty. Make sure to inform the bank holding your NRI account about your return to India.

The interest which was tax-free for your NRE account will be taxable once you come back to India.

What are Eligibility Criteria for NRI Accounts?

To open any type of NRI account, candidates have to be…

  • Students pursuing education and degrees in foreign nations
  • Workers employed in the Indian Navy, oil rigs, overseas shipping companies, or foreign country-registered airlines.
  • A businessman or trader abroad.
  • Government employee

What are the Documents Required for NRI Account?

  • Employment Proof
  • Visa Permit, Student Visa, Employment Visa, Residence Visa or Work Permit
  • Passport Copy
  • Bank Application Form
  • KYC Document

The Last Note:

An NRI might have several reasons to open an NRI account for their financial transactions between his existing residence of nation and India.

While there are three NRI accounts, such as NRE account, NRO account, and FCNR account to choose from, one should understand all the characteristics before opting for anyone. Luckily, banks have simplified things with their guidance and assistance for NRI accounts.

Still needs guidance, Contact us NOW

Published by

Mr. Jasmeet Bhatia

Mr. Jasmeet Bhatia is a co-founder of Landmark Immigration Consultants and has been serving on their board since 2007. In addition to being an education consultant, he is a Canada Course for Education Agents consulting professional graduate and a USATC graduate.

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