Westcliff RealtyThe three accounts at a glance
- NRE (Non-Resident External): a rupee account funded with money you earn abroad. Interest is tax-free in India, and the balance is fully repatriable. You cannot deposit Indian income such as rent
- NRO (Non-Resident Ordinary): a rupee account for income earned in India, such as rent, dividends and sale proceeds. Interest is taxable in India, and repatriation is limited to USD 1 million per financial year
- FCNR(B) (Foreign Currency Non-Resident): fixed deposits held in US dollars or other currencies for one to five years. There is no exchange-rate risk, interest is tax-free in India, and the money is fully repatriable
Which account for which job
- Booking amount and instalments: pay from your NRE account or by wire from the US. This creates the record you need to repatriate the purchase amount when you sell
- Home loan EMIs: pay from NRE or NRO, or by remittance. Rent collected in NRO can service the EMI
- Rent: must be credited to your NRO account
- Sale proceeds: credited to your NRO account, then repatriated under the property rules
- Saving for a future purchase without currency risk: FCNR deposits in US dollars
Tax on interest
NRE and FCNR interest is tax-free in India. NRO interest is taxed in India, and banks deduct TDS at 30% plus surcharge and cess. Under the India–US tax treaty the rate can be lower (15% on interest) if you give the bank a tax residency certificate from the IRS and the required declaration.
Remember that all of this interest, including NRE and FCNR interest, is taxable in the US, and these accounts count towards FBAR and FATCA reporting.
Joint accounts and family
An NRE account can be held jointly with another NRI, or with a resident Indian relative on a former-or-survivor basis. NRO accounts can be held jointly with residents. A resident co-holder is useful for paying bills and dealing with the developer while you are in the US.
Tips
- Keep foreign inward remittance certificates (FIRCs) or bank advices for every transfer used for the property
- Do not mix rent into your NRE account; banks will ask you to move it to NRO
- Update your bank when your residency status changes, for example if you return to India
FAQs
Can I pay for an Indian property directly from my US bank account?
Yes, by wiring the money to India, either to the developer's account or, more usefully, to your NRE account first, so you have a clear record.
Can rent go into my NRE account?
No. Rent is Indian income and must be credited to your NRO account.
Which account gives the best repatriation?
NRE and FCNR balances are fully repatriable. NRO balances can be repatriated up to USD 1 million per financial year after tax.
Is FCNR worth it for a future home purchase?
It can be, if you want to hold US dollars in India without exchange-rate risk until you need to pay.
This guide is general information, not legal or tax advice. Rules change; confirm the details with a chartered accountant or lawyer before you act.