NRE vs NRO vs FCNR Account Rules (AY 2026-27)
Operating bank accounts in India for NRIs is regulated under FEMA and the Income-tax Act, 1961. Resident accounts must be converted upon gaining NRI status.
| Account type | Tax treatment in India | Repatriation rules |
|---|---|---|
| NRE (Non-Resident External) Account | Fully exempt from tax under Section 10(4)(ii). Interest is not taxable in India. | Fully and freely repatriable. Held in Indian Rupees. |
| NRO (Non-Resident Ordinary) Account | Fully taxable in India at standard slab rates. Subject to 30.9% TDS under Section 195. | Repatriation limited to USD 1 Million per financial year under FEMA. |
| FCNR(B) Account | Fully exempt from tax in India for NRIs and RNORs. | Fully and freely repatriable (held in foreign currency). |
Form 15CA & Form 15CB rules
- Account Conversion Requirement: Operating a standard resident savings account after becoming an NRI is a FEMA violation. Accounts must be converted to NRO.
- USD 1 Million Repatriation Limit: NRIs can repatriate up to USD 1 Million per financial year from their NRO account (e.g. from property sales or inheritance).
- Form 15CA & 15CB: Mandatory for NRO outward remittances. Form 15CA is a self-declaration, and Form 15CB is a Chartered Accountant certificate verifying tax clearance.
- Gift Tax (Section 56(2)(x)): Gifts received from resident relatives are tax-free, but gifts to non-relatives exceeding Rs. 50,000 are fully taxable.
Keep these ready before remitting funds
- NRE/NRO interest certificates for the financial year.
- Source of funds proof (property sale deed, bank deposits, inheritance copy).
- Tax clearance proofs / challans.
- Draft Form 15CA and CA-certified Form 15CB.
NRI Repatriation Of Funds Services: year and source check
Last fact-checked: 18 June 2026.
AY 2026-27 means FY 2025-26 income and is filed under the Income-tax Act, 1961. Tax Year 2026-27 means FY 2026-27 income under the Income Tax Act, 2025. Do not mix the two.
Verify stay days, TRC validity, DTAA rates, NRO interest, and Form 15CA/15CB requirements against official CBDT guidelines, notifications, and portal utilities before taking a filing position.
FAQs
Is interest earned on NRE accounts taxable in India?
No. Interest earned on Non-Resident External (NRE) accounts is fully exempt from income tax in India under Section 10(4)(ii).
What is the maximum limit for repatriating funds from an NRO account?
Under RBI and FEMA guidelines, an NRI can repatriate up to USD 1 Million per financial year from their NRO account, subject to payment of applicable taxes and filing of Forms 15CA and 15CB.
Can an NRI continue to hold a resident savings account in India?
No. Under FEMA regulations, once an individual's status changes to non-resident, they must convert their resident bank accounts to Non-Resident Ordinary (NRO) accounts. Operative resident accounts are illegal for NRIs.
Frequently Asked Questions
1. How do DTAA provisions and NRI tax compliance apply to income from NRI Repatriation Of Funds Services?
Under Double Taxation Avoidance Agreements (DTAA), NRIs can claim lower withholding tax (TDS) rates on income from NRI Repatriation Of Funds Services by submitting a Tax Residency Certificate (TRC) and Form 10F online.
2. What are the reporting requirements for residents holding foreign assets related to NRI Repatriation Of Funds Services?
Resident taxpayers holding foreign shares, bank accounts, or investments related to NRI Repatriation Of Funds Services must disclose them in Schedule FA (Foreign Assets) of their ITR to avoid heavy Black Money Act penalties.
3. What is the Double Taxation Avoidance Agreement (DTAA)?
DTAA is a bilateral treaty signed between India and a foreign country to prevent double taxation of the same income in both countries by capping withholding tax rates or providing tax credits.
4. What documents are mandatory to claim DTAA treaty benefits?
Taxpayers must submit: (1) A Tax Residency Certificate (TRC) issued by the tax authority of their country of residence. (2) Form 10F filled out online. (3) A valid Indian PAN.
5. Is interest earned on NRE and NRO accounts taxable?
Interest earned on NRE (Non-Resident External) and FCNB accounts is fully tax-free in India. Interest earned on NRO (Non-Resident Ordinary) accounts is taxable at your slab rate, and subject to 30% TDS.
6. How does Form 10F work, and how is it filed?
Form 10F is a self-declaration filed by non-residents containing details like nationality, tax identification number, and address. It must be filed online on the Income Tax e-filing portal using a digital signature or net banking verification.
7. What is the TDS rate on payments made to NRIs?
TDS on payments to NRIs is governed by Section 195. It is deducted at the maximum rate applicable to the type of income (e.g. 30% on rent/NRO interest, 12.5% on long-term capital gains, 20% on dividends), subject to lower rates under DTAA.
8. Can an NRI claim the Section 87A tax rebate?
No. The Section 87A rebate (which makes tax zero up to ₹12 lakh under the New Regime) is only available to resident individuals. NRIs do not qualify for this rebate and must pay tax on taxable income exceeding basic limits.
9. Which ITR form should an NRI file for FY 2025-26?
NRIs must file ITR-2 (for capital gains, salary, or property income) or ITR-3 (if they have business/professional income). NRIs cannot file ITR-1 (Sahaj).
10. Do NRIs need to declare foreign bank accounts in their Indian ITR?
No. NRIs do not need to report foreign bank accounts, foreign stocks, or assets in Schedule FA. Only resident taxpayers are mandatory to report foreign assets.
11. What is Schedule FA and who must file it?
Schedule FA (Foreign Assets) is a mandatory schedule in ITR-2/ITR-3 for resident taxpayers. It requires reporting details of all foreign assets (shares, mutual funds, bank accounts, property) held at any time during the calendar year.
12. What is the penalty for failing to file Schedule FA?
Under the Black Money Act, resident taxpayers who fail to disclose foreign assets in Schedule FA or underreport value face a flat penalty of ₹10 lakh per year, plus interest and potential prosecution.
13. How do I claim Foreign Tax Credit (FTC) in India?
To claim credit for taxes paid in a foreign country on double-taxed income, you must file Form 67 online on the e-filing portal along with proof of tax payment/withholding before filing your ITR.
14. Are capital gains on Indian mutual funds taxable for NRIs?
Yes, capital gains are taxable for NRIs. Equity LTCG is taxed at 12.5% (>12 months), STCG at 20%. Debt mutual fund gains are taxed at slab rates. The fund house will deduct TDS on redemptions.
15. Can an NRI buy agricultural land in India?
Under FEMA regulations, an NRI or OCI cannot purchase agricultural land, plantation property, or farmhouse in India. They can, however, inherit such properties or buy commercial/residential properties.