To comply with the Foreign Exchange Management Act (FEMA) rules, an NRI cannot have regular savings accounts in India. Therefore, you must convert existing accounts to NRO accounts and excess accounts must be closed. This step is important once your status changes from resident Indian to NRI and can be done either online, for selected banks, or during your next visit to India.

Note: Resident Foreign Currency (RFC) are for NRIs who have returned to India and used to store foreign currency, say in USD, GBP and EUR. These amounts are repatriable and can receive funds from abroad or other NRE / FCNR accounts.

Non-Resident External (NRE) Account

An NRE account can be opened only once you are an NRI as a fresh account. Old accounts, which existed when you were a resident Indian, must be converted into NRO accounts, not NRE accounts. You can check your NRI status here: Who is an NRI and who is not? Understanding FEMA and NRE/NRO bank accounts.

This account is used to send money to India. The features and uses are:

• This is a fresh account that can only be opened by an NRI. Existing resident Indian or NRO accounts cannot be converted to NRE
• Money deposited in this account must originate outside India.
• Interest earned is tax-free in India but may be taxable in the country where the NRI is residing.
• You can send both interest and principal out of India without limits.
• Deposits can only be made in foreign currency, and withdrawals are in INR.
• Joint accounts are allowed only with another NRI.
• You can transfer funds to other NRE or NRO accounts.
• It may be used for stock investing but is not recommended.
• It is the best option for Mutual Fund investing due to easy repatriation.
• It cannot be used for investing in RBI/Gilt bonds.

Non-Resident Ordinary (NRO) Account

This account is used for any income and investments in India. The features and uses are:

• Existing savings accounts are converted to NRO accounts (and not NRE) once you leave the country and status changes to NRI from resident Indian as per tax residency rules
• Interest earned is taxable in India at current slab rates. The benefit of the Double Taxation Avoidance Agreement (DTAA) is available with most countries so that you can offset tax paid in India as an input tax credit in your home country.
• You can send both interest and principal out of India, but the principal must be within $1 million. A CA must certify that you have paid taxes on this income.
• You can make deposits in both foreign currency and INR, and withdrawals are in INR.
• Joint accounts are allowed with another NRI or a resident.
• Incoming transfer into NRO from Indian resident accounts do not attract TCS under the LRS rules
• Funds can be transferred only to another NRO account or to even resident accounts.
• Transfer from NRO to an NRE account i.e. for repatriation is capped at $1 million per financial year and requires CA input on the required forms to be filled
• This account is used to receive income from interest, FD, rent, stock and MF dividends, and the proceeds from selling real estate, stocks, and mutual funds.
• It can be used for both stock and MF investing.
• Only NRO accounts can be used for investing in and for receiving interest from RBI/Gilt bonds from the RBI Retail Direct Portal.

Foreign Currency Non-Resident (FCNR) Account

Note: FCNR(A) accounts were discontinued in 1993 and used to have exchange rate guarantee from the RBI. Now only FCNR(B) accounts, without exchange rate guarantees, exist.

• NRIs or PIO card holders can open FCNR(B) accounts either singly or jointly with other NRIs
• FCNR(B) accounts are term deposit (FD-type) accounts held in foreign currency (USD, EUR, GBP, AUD, SGD, CAD, CHF, HKD are typical)
• Interest is paid every 180 days and the account matures in one to five years
• Interest earned is tax-free in India
• Both principal and interest are fully repatriable
• Pre-mature withdrawal is possible with interest rate penalties
• They eliminate currency conversion risk since they are held in foreign currency
• Can be used for payments in India, making investments and transfers to other NRE or FCNR accounts

Tax Treatment for selling mutual funds during FY2025-26

Important considerations for using this table:

• These tax rules are the same for every type of investor in terms of tax-residency: Resident Indian, NRI, RNOR, and ROR
• Specified Taxation applies to funds holding no more than 35% in domestic shares (or arbitrage positions). This category includes all mutual funds which do not hold equity (e.g. all debt funds and funds that hold some amount of equity up to 35%)
• While every care has been made while collating this information, please check with your tax advisor for calculating the impact of taxes.