NRE vs NRO accounts: which should you use?
Use an NRE account for money you earn abroad and send to India, and an NRO account for income you earn in India, such as rent, dividends or a pension. The big differences are tax and repatriation: NRE interest is tax-free in India and the whole balance can be moved back out freely, while NRO interest is taxed in India and moving NRO savings abroad is capped at US$1 million a financial year.
Written by Sonic Wallet editorial team · Last reviewed: 1 November 2026
Key facts
- NRE and NRO accounts both hold Indian rupees and are for people who live outside India, including non-resident Indians (NRIs) and OCI cardholders.
- NRE accounts are built for money from abroad. NRO accounts are built for income earned in India, and can also receive money from abroad.
- Interest on an NRE account is tax-free in India; interest on an NRO account is taxable in India.
- An NRE balance can be moved back out of India at any time. From an NRO account, NRIs can move up to US$1 million a financial year (April to March) abroad, after tax.
- If you are UK tax resident, interest earned in India is normally taxable in the UK, even when it is tax-free in India.
What is the difference between an NRE and an NRO account?
An NRE (Non-Resident External) account holds money you bring into India from abroad, while an NRO (Non-Resident Ordinary) account holds income you earn in India. Both are rupee accounts, but they are taxed differently and have different rules for moving money back out of India.
| NRE account | NRO account | |
|---|---|---|
| Who can open one | NRIs and persons of Indian origin, including OCI cardholders | Anyone resident outside India, including NRIs and OCI cardholders |
| Currency | Indian rupees | Indian rupees |
| Built for | Money earned abroad | Income earned in India, such as rent, dividends or a pension |
| Money from the UK | Yes | Yes |
| Interest taxed in India | No, it is tax-free | Yes, with tax deducted by the bank |
| Moving money out of India | Freely, including the interest | Current income after tax, plus up to US$1 million a financial year |
| Joint accounts | With other NRIs, or with a resident relative on a 'former or survivor' basis | With other NRIs, or with residents on a 'former or survivor' basis |
| Account types | Savings, current, recurring and fixed deposit | Savings, current, recurring and fixed deposit |
Which account should you send money from the UK to?
If the money is your UK earnings or savings, an NRE account is usually the better fit: the interest is tax-free in India and you can move the money back to the UK whenever you like.
An NRO account makes sense if you want the money alongside income you already receive in India, for example to pay Indian bills or taxes. Many NRIs keep both.
If you are sending money to a family member who lives in India, neither applies: NRE and NRO accounts are only for people who live outside India, so you pay into your relative's ordinary bank account.
Is interest on an NRE account tax-free?
Yes, in India: interest on an NRE account is exempt from Indian income tax while you are resident outside India. The same applies to FCNR deposits, which are explained below.
It may not be tax-free in the UK. If you are UK tax resident, you normally pay UK tax on foreign savings interest, including interest from India, unless you are eligible for Foreign Income and Gains relief. Before 6 April 2025, people whose permanent home (domicile) was abroad could sometimes avoid this, but that rule has ended.
Interest on an NRO account is taxable in India, and the bank deducts the tax before paying it. If the same income is taxed in both countries, you may be able to claim relief so that you are not taxed twice.
Can you move money from an NRO account to an NRE account?
Yes, within the US$1 million a financial year that NRIs can move out of NRO balances, once tax has been paid. Your bank will ask for a declaration and, depending on the amount, a chartered accountant's certificate that the tax has been paid.
Current income credited to an NRO account, such as rent, dividends or a pension, can be sent abroad after tax without counting towards that limit. Larger amounts need approval from the Reserve Bank of India.
What happens to NRE and NRO accounts if you move back to India?
Tell your bank when you return, because the accounts must be converted. An NRE account becomes a resident account, or its balance moves to a Resident Foreign Currency (RFC) account if you prefer, and an NRO account becomes a resident account.
What is an FCNR account?
An FCNR(B) account is a fixed deposit held in a foreign currency, such as pounds, rather than in rupees. It lasts from 1 to 5 years, protects you from movements in the exchange rate while the money is in India, and its interest is tax-free in India for non-residents.
Sending money to India?
See how many rupees your family will receive, what it costs, how long it takes and the details you need.
Send money to IndiaFrequently asked questions
Can I send money from the UK to an NRO account?+
Yes. NRO accounts can receive money from abroad as well as income earned in India. Interest on the balance is taxable in India, though, and moving savings back out of India is limited to US$1 million a financial year.
Is NRE interest taxable in the UK?+
It can be. If you are UK tax resident, you normally pay UK tax on foreign savings interest, even when it is tax-free in India, unless you are eligible for Foreign Income and Gains relief. This is general information, not tax advice.
Can a resident Indian be a joint holder on my NRE account?+
Only a resident relative, and only on a 'former or survivor' basis, according to the Reserve Bank of India. The resident relative can operate the account under a power of attorney during your lifetime.
Who counts as an NRI?+
Under India's foreign exchange rules, a non-resident Indian (NRI) is an Indian citizen who lives outside India. People of Indian origin with another citizenship, including OCI cardholders, count as persons of Indian origin and can also open NRE and NRO accounts.
How much money can I move out of an NRO account?+
Up to US$1 million per financial year (April to March), after tax, on top of current income such as rent, dividends and pensions. Larger amounts need Reserve Bank of India approval.
Related guides
- Do you pay tax on money sent from the UK to India?UK inheritance tax on gifts, India's gift tax rules and when the recipient pays.
- How to send money to India with UPI from the UKPaying a UPI ID from the UK, and how NRIs can use UPI with a +44 mobile number.
- How much money can you send to India from the UK?UK and Indian rules, provider limits and the cap on cash-collection transfers.
- What bank details do you need to send money to India?IFSC codes, account numbers, UPI IDs and when you need a SWIFT code.
Useful tools and pages
Sources
- Accounts in India by non-residents, Reserve Bank of India
- FAQs on remittance of assets, Reserve Bank of India
- Exempt income for non-residents, section 10(4)(ii), Income Tax Department, Government of India
- Tax on foreign income, GOV.UK