An NRE account (Non-Resident External account) is a rupee bank account in India for people who live outside India. You fund it with money earned abroad, the bank holds it in rupees, and you can send the balance and the interest back out of India whenever you want. India does not tax the interest while you are a non-resident, but the US does, and the account counts toward your FBAR filing.
What is an NRE account, and who can open one
Indian banks offer NRE accounts under the Reserve Bank of India's foreign exchange rules. Those rules have their own test of who is a non-resident. In broad terms, you qualify once you have left India to work, run a business or live abroad for an uncertain period. An Indian citizen in the US on an H-1B or a green card meets that test. So does a US citizen of Indian origin, including one who holds an OCI (Overseas Citizen of India) card.
The same rules say you should not keep running an ordinary resident savings account after you move. The bank converts your old account into an NRO (Non-Resident Ordinary) account, and an NRE account is opened separately.
What money can go into an NRE account
An NRE account is meant for money that comes from outside India. The usual credits are:
- A wire or app transfer from your US bank account.
- A transfer from another NRE account or from an FCNR deposit (a foreign currency fixed deposit) in your name.
- Interest the account itself earns.
You cannot deposit rupee cash, and a relative in India cannot pay rupees into it from a resident account. Money that arises in India, such as rent, dividends or the proceeds of a property sale, normally goes into your NRO account first. It can move from NRO to NRE only after Indian tax has been paid on it and the bank has the paperwork it asks for. Confirm the current process with your bank.
The account is held in rupees. When your dollars arrive, the bank converts them at its rate that day. If you later send the money back to the US, the bank converts it again at that day's rate. You carry the exchange rate risk in between.
Moving the money back to the US
NRE balances are freely repatriable. That means you can send both the amount you put in and the interest it earned back abroad without an annual limit and without a tax certificate. This is the main practical difference from an NRO account, where transfers out of India are capped each financial year and need tax paperwork.
NRE account interest tax: India and the US
India exempts NRE interest from income tax for an individual who is a non-resident under the exchange control rules. The bank does not deduct tax at source (TDS), and the exemption applies to both the savings account and fixed deposits. That status is a different test from the day count used for Indian income tax residency.
The US works differently. If you are a US citizen, a green card holder or a US resident for tax purposes, you are taxed on your worldwide income. NRE interest is ordinary interest income on your federal return, and it goes on Schedule B with your US bank interest. Schedule B also asks whether you had a foreign account, and the answer is yes.
The Indian bank will not send you a Form 1099. You take the rupee interest from the bank's interest certificate or statement for the US calendar year, which runs January to December. India's financial year runs April to March, so ask for the right dates. You then convert the figure to dollars. The IRS accepts its published yearly average exchange rate for this.
Because India took no tax, you have no foreign tax credit to claim on NRE interest. The comparison with NRO interest, where India does withhold tax, is worked through in NRE and NRO pay the same rate, but not the same return.
A worked example
Suppose your NRE fixed deposit credits ₹1,00,000 of interest during 2026, and assume an average rate of ₹90 to the dollar for the year.
| Item | Amount |
|---|---|
| NRE interest for 2026 | ₹1,00,000 |
| Indian tax | ₹0 |
| Interest in dollars at ₹90 | $1,111 |
| Federal tax at a 24% bracket | $267 |
| Interest kept after federal tax | $844 |
State income tax, if your state has one, comes on top. The exchange rate and the bracket are assumptions for the example.
The NRE account and the FBAR threshold
An NRE account is a foreign financial account. You must file an FBAR (FinCEN Form 114) if the combined highest balances of all your foreign accounts went over $10,000 at any point in the calendar year. The test adds up every account: NRE, NRO, FCNR deposits and anything else you hold outside the US.
Say your NRE savings account peaked at ₹6,00,000 and your NRE fixed deposit at ₹5,00,000. At ₹90 to the dollar that is about $6,667 and $5,556. Neither is over $10,000 alone, but together they are about $12,222, so you file and list both. The FBAR is a report and carries no tax. Our free FBAR calculator adds up your accounts and tells you where you stand.
Savings account versus fixed deposit
An NRE savings account works like any savings account. You can pay bills in India from it and withdraw at any time, and it pays a low rate.
An NRE fixed deposit (FD) locks the money for a term you choose and pays a higher rate. The shortest NRE FD term is one year. If you break an NRE FD before it has run for a year, banks generally pay no interest at all, so keep money you may need soon in the savings account. Current FD rates at eight banks are in NRI FD rates compared.
Many FDs are cumulative, which means the interest is added to the deposit and paid only at maturity. For US tax, do not assume you can wait until maturity to report it. Interest on a multi-year deposit is generally reported each year as it builds up. Confirm the treatment with your tax preparer.
Joint holding
You can generally hold an NRE account jointly with another non-resident, such as a spouse who also lives in the US. Holding it jointly with a relative who lives in India is more restricted. As a general description, the rules allow a resident close relative to be added only on a "former or survivor" basis. That means you operate the account during your lifetime and the relative takes over only if you die. A resident relative who needs to make payments for you in the meantime usually does so under a power of attorney.
Banks apply these conditions differently, so have the bank confirm the current rules before you add anyone. On the US side, each joint holder who is a US person has an FBAR obligation of their own for the account.
What happens to your NRE account when you move back to India
Once you return to India to live, you stop being a non-resident under the exchange control rules, and you are expected to tell your bank. The bank then redesignates the NRE account as a resident rupee account. You can instead move the balance into an RFC (Resident Foreign Currency) account, which holds foreign currency for people who have returned.
The Indian tax exemption on NRE interest ends with your non-resident status. Interest earned after that is taxable in India like any resident's bank interest. Ask the bank how your existing FDs will be treated on the change. If a move is on your calendar, our returning NRI service covers the account changes along with the tax timing.
How NRE differs from NRO and FCNR
| NRE | NRO | FCNR | |
|---|---|---|---|
| Money it holds | Earned abroad | Earned in India | Earned abroad |
| Currency | Rupees | Rupees | Foreign currency, such as dollars |
| Indian tax on interest | Exempt while non-resident | Taxed, with TDS | Exempt while non-resident |
| Sending money abroad | Free | Capped each year | Free |
| Form | Savings or FD | Savings or FD | FD only |
How to choose between the three is covered in NRE vs NRO vs FCNR: three accounts, two questions.
Common questions
Do I have to report NRE interest to the IRS if India does not tax it?
Yes. The Indian exemption has no effect on your US return. A US tax resident reports the interest as income each year.
Can my parents deposit money into my NRE account?
Not from their resident rupee account, and not in cash. Rupee gifts from a resident go to your NRO account.
Do I need to file an Indian tax return because of my NRE account?
NRE interest alone is exempt, so it does not create Indian taxable income. Whether you must file depends on your other Indian income, such as rent or NRO interest.
Playbook Move: Pull this year's statements for every Indian account you hold and write down two numbers for each: the highest balance and the interest credited between January and December. The first tells you whether you cross the FBAR threshold. The second is what goes on Schedule B. If you still have a resident savings account from before you moved, ask the bank to convert it to NRO.
For informational purposes only; not financial, tax, or legal advice. For decisions about your specific situation, consult a qualified cross-border tax professional.