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.
TCS on Foreign Remittance - LRS Guide: 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. What are the LRS remittance limits and TCS rules for outward transfers involving TCS on Foreign Remittance - LRS?
Foreign remittances for TCS on Foreign Remittance - LRS under the Liberalised Remittance Scheme (LRS) are subject to a USD 250,000 limit. Tax Collected at Source (TCS) applies at rates up to 20% on transactions exceeding ₹7 lakh.
2. What documents are required to execute a foreign remittance for TCS on Foreign Remittance - LRS?
Remitting funds abroad for TCS on Foreign Remittance - LRS requires submitting Form A2 and a valid PAN to the authorized dealer bank, along with supporting invoices, agreements, or foreign institutional details.
3. What is the TCS rate on foreign education remittances?
TCS on education remittances is NIL up to ₹7 lakh per FY. On amounts exceeding ₹7 lakh, the rate is: (1) 0.5% if the remittance is funded by an education loan from a financial institution. (2) 5% if funded by self/other sources.
4. What is the TCS rate on overseas tour packages?
For overseas tour packages, TCS is collected by the tour operator at: (1) 5% on package costs up to ₹7 lakh per financial year. (2) 20% on the portion exceeding ₹7 lakh per financial year.
5. What is the TCS rate on other remittances (investments/gifts) under LRS?
For other remittances like foreign stock investments, bank transfers, or gifts, TCS is NIL up to ₹7 lakh per financial year, and a flat 20% on any amount exceeding the ₹7 lakh threshold.
6. Is the ₹7 lakh TCS threshold limit calculated per bank account?
No. The ₹7 lakh threshold limit is a PAN-level limit calculated across all bank accounts and authorized dealers in a financial year, tracked via the RBI's LRS portal.
7. How do I claim a refund for the TCS collected by the bank?
TCS is not an additional tax; it is a tax credit. The collected TCS reflects in your Form 26AS/AIS. You can claim it against your final tax liability when filing your ITR, or claim a refund if your total tax liability is NIL.
8. Can a partnership firm or company remit money under LRS?
No. The LRS facility is strictly restricted to resident individuals (including minors). Partnership firms, HUFs, LLPs, trusts, and corporate entities are not eligible to remit funds under LRS.
9. What are the prohibited transactions under LRS?
Remittances are prohibited for: margin calls to foreign exchanges, trading in foreign exchange, purchasing lottery tickets, sweepstakes, banned magazines, or making remittances to entities violating FEMA regulations.
10. What is Form A2 and why is it required?
Form A2 is a application-cum-declaration form prescribed by the RBI that must be completed and submitted to the bank for any foreign exchange purchase or outward remittance under LRS.
11. Does TCS apply to international credit card transactions?
International credit card transactions executed while traveling abroad are currently excluded from the LRS limits and do not attract TCS. However, transactions on debit cards or forex cards are counted under LRS and attract TCS.
12. What is the TCS rate on e-commerce transactions under Section 206C(1H)?
Under Section 206C(1H), sellers whose turnover exceeds ₹10 crore must collect TCS at 0.1% on receipts exceeding ₹50 lakh from a buyer in a FY. It is separate from the LRS outward remittance TCS.
13. What happens if I remit money without a PAN?
Outward remittances under LRS are not permitted by banks without a valid PAN. If PAN is inoperative, the bank will refuse the remittance or apply TCS at double the standard rate (minimum 20%).
14. What is Form 27D and when is it issued?
Form 27D is the official TCS certificate issued by the collecting bank/authorized dealer to the remitter within 15 days from the due date of filing the quarterly TCS return, certifying the tax amount collected.
15. Does LRS apply to Non-Resident Indians (NRIs)?
No. LRS is strictly for resident individuals. NRIs remit funds out of India under different guidelines, such as the USD 1 million scheme for NRO accounts, subject to submitting Form 15CA/15CB.