Difference between NRE and NRO FDs
The difference between NRE and NRO FDs lies in the source of funds, tax and repatriation. An NRE FD holds foreign earnings, is tax-free and fully repatriable, while an NRO FD mainly holds income earned in India, is taxable and allows only limited repatriation of principal.
NRE, or Non-Resident External accounts and NRO or Non-Resident Ordinary accounts, are special account options that are only available to NRIs.
They come with a number of benefits including tax exemptions, full repatriability, etc. In this article, we will explore the difference between an NRE and an NRO account.
What is an NRE account?
An NRE FD is a type of term deposit account where the NRI makes deposits from overseas and remits the same in an Indian account, where the currency will be converted into rupees.
An NRE deposit is basically a term deposit account held to transfer foreign earnings.
What is an NRO account?
An NRO account is usually opened by an NRI in order to manage the income that is earned in India. This income can be in the form of rent, pension or other types of dividends.
The interest earned from these deposits is taxable.
Difference between an NRE and an NRO account
Parameters | NRE | NRO |
Repatriation | Fully repatriable (principal and interest) | Restricted repatriability |
Joint Holding | Can be opened jointly with other NRIs, or with a resident relative on a former or survivor basis | Can be opened jointly with an Indian resident |
Tax Liability | Free from tax | Subject to tax |
Transfer of Funds | Funds transfer permitted to both NRO and NRE accounts | Funds transfer permitted to NRO accounts, and to NRE accounts within the $1 million per financial year limit |
Interest Rates | Interest rates are set by the bank and are comparable to NRO rates for the same tenure | Interest rates are set by the bank and are comparable to NRE rates for the same tenure |
Sources of Funds | Can be opened with income earned abroad and converted into Indian rupees | Can be opened with income earned within the country as well as funds remitted from abroad |
Taxation - NRO fixed deposits attract taxes as per Indian laws. The interests earned from an NRO FD are taxed according to the Income-tax Act, 2025 at around 30%, which is quite high when compared to domestic FD rates.
NRE fixed deposits do not attract taxes on the principal or interests earned from the deposits. Consequently, NRE fixed deposits are completely tax-free. This difference makes an NRE FD a better option than its NRO avatar.
Tax is deducted at source on NRO FD interest at 30%, plus applicable surcharge and Health and Education cess, unless a lower rate applies under a Double Taxation Avoidance Agreement (DTAA).
Repatriation - NRO FDs allow the principal to be repatriated only up to $1 million per financial year, subject to conditions, while the interest earned from your NRO FD can be transferred to a foreign account.
NRE fixed deposits offer the option for full repatriation of funds including both principal and accrued interests to a foreign account. These accounts therefore simplify the process of transferring principal and earned interests from an Indian account to a great deal.
Joint accounts - Any two NRIs can opt for either an NRO or an NRE joint account without any complications. An NRO account can also be held jointly with a resident on a former or survivor basis.
NRE fixed deposits can be opened jointly with a resident relative only on a former or survivor basis, and during the lifetime of the NRI the resident relative can operate the account only as a power of attorney holder.
Deposit and withdrawal - Funds originating in India, as well as inward remittances from abroad, can be used to open an NRO account, and consequently, an NRO fixed deposit. Funds from an NRE account can be transferred into an NRO account for the purpose of opening a fixed deposit.
NRE accounts are opened by remitting foreign currency earned from abroad directly into the fixed deposit account. NRE fixed deposits can be opened by transferring funds from an NRO account only within the $1 million per financial year limit, and not from a resident savings account.
Banks in India can grant loans against NRE and NRO fixed deposits to the account holder or a third party, subject to the usual margin requirements. The loan cannot be used for relending, agricultural or plantation activities or investment in real estate business.
Interest rates - The rate of interest in NRO and NRE accounts may vary according to the bank you are applying in. As such, it is imperative that you check the available rates to find the option with the highest returns for you. Typically, an NRE or NRO FD is offered with maturity between one and 10 years.
Overall, the choice between an NRE and an NRO fixed deposit boils down to your preferences according to the benefits that you can avail out of the two types of accounts. A point to remember here is that NRE accounts are used to park foreign earnings in Indian accounts and in INR, while an NRO account is used to park funds earned from India.
Top NRE FD Rates Offered by Banks
Below are the top NRE FD interest rates offered by banks for deposits less than Rs.3 crore.
Bank | 1 Year (p.a.) | 2 Years (p.a.) | 3 Years (p.a.) | 5 Years (p.a.) |
State Bank of India (SBI) | 6.25% | 6.40% | 6.30% | 6.05% |
Bank of Baroda | 6.25% | 6.25% | 6.25% | 6.30% |
Bank of India | 6.50% | 6.60% | 6.70% | 6.00% |
Central Bank of India | 6.10% | 6.25% | 6.00% | 6.00% |
Indian Overseas Bank | 6.50% | 6.40% | 6.10% | 6.10% |
Note: Interest rates updated on 7 October 2026.
Top NRO FD Rates Offered by Banks
Bank | General Public (p.a.) | Senior Citizens (p.a.) |
Axis Bank | 3.00% to 6.50% | Not applicable |
Bank of Baroda | 3.50% to 6.75% | Not applicable |
State Bank of India | 3.05% to 6.45% | Not applicable |
Bank of India | 3.00% to 6.60% | Not applicable |
Punjab National Bank | 3.00% to 6.60% | Not applicable |
IDBI Bank | 3.00% to 6.50% | Not applicable |
Note: Interest rates updated on 7 October 2026.
How to Choose between NRE FDs and NRO FDs
- NRIs will have to choose between NRE FDs and NRO FDs based on their requirements. It is also crucial to choose the right bank to open an NRE or NRO FD account.
- Go for an NRE FD if you want to mainly park funds from foreign countries and want the currency to be fully repatriable.
- On the other hand, it is best to go for an NRO deposit if you want to park your Indian earnings.
Summary
The difference between NRE and NRO FDs comes down to where your money is from: NRE FDs hold foreign earnings, are tax-free and fully repatriable, while NRO FDs mainly hold income earned in India, are taxable and have limited principal repatriation. Both can be opened by NRIs and compared using the bank rate tables above. Choose an NRE FD to park overseas earnings and an NRO FD to park income earned in India.
FAQs on Difference between NRE and NRO FDs
1.What is the difference between NRE and NRO FDs?
The main difference between NRE and NRO FDs is the source of funds: an NRE FD holds foreign earnings remitted to India, while an NRO FD holds income earned in India. NRE FDs are tax-free and fully repatriable, whereas NRO FD interest is taxable and repatriation of principal is limited. The comparison table above sets out the other differences.
2. Who can open NRE and NRO FDs?
NRE and NRO FDs are meant for NRIs, and persons of Indian origin can open them too. An NRO account can also be opened by any person resident outside India for bona fide rupee transactions.
3.Which funds can be used to open NRE and NRO FDs?
An NRE FD is opened with foreign earnings remitted to India and converted into rupees, while an NRO FD is usually opened with income earned in India such as rent or pension. Inward remittances from abroad can also be credited to an NRO account used for an NRO FD. Transfers from an NRO account to an NRE account are allowed only within the limit set by RBI.
4.Are NRE and NRO FDs taxable in India?
Interest on an NRE FD is exempt from income tax in India, while interest on an NRO FD is taxable. Banks deduct tax at source on NRO FD interest at the prescribed rate. A lower rate under a Double Taxation Avoidance Agreement (DTAA) may apply where relevant.
5.Can the principal and interest of NRE and NRO FDs be repatriated?
Both the principal and the interest of an NRE FD can be repatriated abroad, while an NRO FD allows interest to be remitted as current income. The principal of an NRO FD can be repatriated only up to the annual limit set by RBI, subject to conditions. These differences between NRE and NRO FDs are explained in the repatriation section above.
6.Can NRE and NRO FDs be opened jointly with a resident Indian?
NRE and NRO FDs can be held jointly by two or more NRIs. An NRO FD can also be held jointly with a resident on a former or survivor basis, and an NRE FD with a resident relative on the same basis. During the lifetime of the NRI, the resident relative can operate an NRE account only as a power of attorney holder.
7.Can funds be transferred between the accounts used for NRE and NRO FDs?
Funds from an NRE account can be transferred into an NRO account to open an NRO FD. Transfers from an NRO account to an NRE account are allowed only within the limit set by RBI each financial year. This rule applies to both NRE and NRO FDs opened through these accounts.
8.Do NRE and NRO FDs earn the same interest rate?
Each bank sets its own interest rates for NRE and NRO FDs, and the rates are often comparable for the same tenure. Rates are revised from time to time, so check the rate tables above before booking an NRE or NRO FD.
9.What tenure is available for NRE and NRO FDs?
NRE and NRO FDs are typically offered for tenures of up to 10 years, and an NRE FD needs a minimum tenure of one year. Some banks also offer shorter tenures for NRO FDs, so check the bank's rate table for the tenures available.
10. Do senior citizens earn additional interest on NRE and NRO FDs?
Many banks do not offer additional senior citizen interest on NRE and NRO FDs, although policies differ from bank to bank. Check the rate card of the bank you choose before booking.
11.Can I take a loan against NRE and NRO FDs?
Yes, banks in India can grant loans against NRE and NRO FDs to the account holder or a third party, subject to RBI norms and margin requirements. The loan cannot be used for relending, agricultural or plantation activities or investment in real estate business.
12.Which is better, an NRE FD or an NRO FD?
The better option among NRE and NRO FDs depends on where your money comes from and where you want to use it. An NRE FD suits foreign earnings that you may want to repatriate, while an NRO FD suits income earned in India.
13. Which of NRE and NRO FDs is riskier?
NRE and NRO FDs are both rupee deposits, so the safety of the deposit depends on the bank rather than on the account type. Exchange rate movements affect the foreign currency value of the money when you repatriate funds from either an NRE FD or an NRO FD.
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