A Guide to Cross-Border Bank Accounts (NRO, NRE, FCNR and RFC)

Account	Holds	Currency	Repatriable?	Interest taxed?	On return
NRO	Indian income	INR	Up to $1M/FY	Yes (30% TDS)	Convert to resident account
NRE	Foreign Income	INR	Fully	Tax-free (as NRI)	Convert to resident account
FCNR	Foreign income	Foreign	Fully	Tax-free (NRI/RNOR)	Continue till maturity, then convert
RFC	Foreign income	Foreign	Fully	Tax-free (RNOR only)	Open only after return

NRI bank accounts may seem like a shuffle of acronyms with varying rules for taxes, repatriation and usage, which makes it quite confusing to understand. So I thought of putting together a simple guide to 4 bank accounts NRIs should look out for when planning cross-border finances.

1. NRO (Non-Resident Ordinary) Account (your Indian Rupee first gullak)

• Purpose: Hold income earned in India (rent, dividends, property sale proceeds).

• Tax & Repatriation: You can repatriate up to USD 1 million per FY after submitting Form 15CA/15CB. Interest is taxable at 30% TDS. 

💡Keep in mind: When returning back to India, this account must be converted into a resident savings account. As repatriation is limited, it’s also best to use this account for long-term investments that are supposed to stay and grow in India.

2. NRE (Non-Resident External) Account (for receiving all your foreign ka paisa)

• Purpose: Deposit foreign earnings in India; fully repatriable.

• Tax & Repatriation:  Funds in NRE remain fully repatriable, and interest is tax-free while you are an NRI. After returning to India, the account must be redesignated as resident (interest will then become taxable).

💡Keep in mind: Similar to NRO, after returning, NRE needs to be redesignated as a resident account. You can run existing deposits till maturity, but converting to a resident FD or RFC account may be ideal. Also, the account is rupee-denominated, so currency risk applies if you repatriate later.

3. FCNR (Foreign Currency Non-Resident) Account (for NRIs to keep foreign ka paisa in foreign currency itself, in India)

• Purpose: Foreign currency fixed deposit (USD, GBP, EUR, etc.) to avoid exchange rate risk.

• Tax & Repatriation: Interest is tax-free while you’re NRI or RNOR; funds are fully repatriable.

💡Keep in mind: You can continue to keep FCNR till maturity after returning, then convert to a resident FD or RFC deposit. Make sure the bank you get the account with is RBI-approved to enjoy tax benefits.

4. RFC (Resident Foreign Currency) Account (for Residents to hold foreign currency, in India)

• Purpose: Let returning NRIs hold foreign currency in India, offering flexibility for overseas needs or currency hedging.

• Tax & Repatriation: Interest is tax-free during the RNOR phase, and funds are fully repatriable anytime.

💡Keep in mind: NRIs cannot open this account. You can only open it after returning to India. Use it to manage foreign currency, and plan carefully once you convert funds to INR or resident FDs.

A quick way to think about it

While you are abroad, NRO holds your Indian income, NRE holds your foreign income in rupees, and FCNR holds your foreign income in foreign currency. Once you move back, the NRO and NRE redesignate to resident accounts, while RFC becomes the natural home for any foreign currency you want to hold onto.

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