The single most confusing aspect of becoming an NRI is the bank account alphabet. There are four core types, each with a specific job. Pick wrong and you create either tax problems, repatriation problems, or both.

NRE — Non-Resident External

• Currency: Indian Rupee (INR)
• Funded by: foreign-currency remittances from abroad, or transfers from another NRE / FCNR account
• Repatriation: fully repatriable — both principal and interest, in any currency, anytime
• Tax: interest is tax-free in India
• Joint account: only with another NRI
• Best for: parking foreign earnings, paying for Indian mutual fund SIPs (when you want full repatriability), receiving funds for family in India

NRO — Non-Resident Ordinary

• Currency: INR
• Funded by: Indian-source income (rent, dividends, pension, sale of property, gifts from residents), foreign remittances
• Repatriation: capped at USD 1 million per financial year (post-tax), subject to documentation (Form 15CA / 15CB by a CA)
• Tax: interest is taxable, TDS deducted at 30% (+ surcharge + cess) unless DTAA benefit claimed
• Joint account: can be with another NRI or a resident relative
• Best for: collecting Indian-source income, paying Indian liabilities, holding existing INR funds you don't immediately need to repatriate

FCNR(B) — Foreign Currency Non-Resident (Bank)

• Currency: foreign currency — USD, GBP, EUR, JPY, AUD, CAD, etc.
• Funded by: foreign remittances or transfers from NRE / FCNR accounts
• Tenure: 1 to 5 years (term deposit only — no savings variant)
• Repatriation: fully repatriable, principal + interest
• Tax: interest tax-free in India
• Currency risk: none — held and returned in the same foreign currency
• Best for: medium-term INR-conversion-free parking, locking interest rates on foreign currency

RFC — Resident Foreign Currency

• Currency: foreign currency
• Funded by: NRE / FCNR balances after returning to India, foreign pension, gifts from non-residents
• Open only when you become a resident again (returning NRI)
• Repatriation: freely repatriable
• Tax: interest taxable for ROR; exempt while you are RNOR
• Best for: returning NRIs who want to keep funds in foreign currency before deciding how to deploy them

NRE vs NRO — the critical decision

Feature	NRE	NRO
Currency	INR	INR
Source of funds	Foreign earnings only	Foreign or Indian
Repatriation limit	None	USD 1M / FY
Interest taxation	Tax-free	Taxable, TDS 30%
Joint with resident	No	Yes

Typical setup for a US-based NRI

• NRE savings + NRE FD for fresh USD-to-INR remittances (tax-free interest, fully repatriable)
• NRO savings for rent from Indian property, mutual fund redemptions of pre-NRI investments
• FCNR FD for funds you don't want to convert to INR (avoid rupee depreciation in the short term)
• PIS-enabled NRE Demat for fresh equity purchases on a repatriation basis

Linking accounts to investments

• Mutual fund SIPs from NRE = repatriable. From NRO = non-repatriable.
• NSE/BSE equity purchases on repatriation basis = NRE PIS account. Non-repatriable basis = NRO non-PIS.
• You can keep both repatriable and non-repatriable folios — many NRIs do.

The PIS rule for equity

The Portfolio Investment Scheme (PIS) requires NRIs buying listed equities to route trades via a designated bank's PIS account. As of 2024, the PIS requirement applies to NRE-side equity purchases — NRO-side equity purchases no longer require PIS. Check current RBI master directions before opening.

One common mistake

Crediting Indian-source income (rent, dividends) into an NRE account is a FEMA violation. Always route Indian-source flows through NRO. Use NRE strictly for foreign-origin funds.

Next chapter: what NRIs can actually invest in.