The short answer. An NRE account holds money you earned outside India and can be sent back out without limit. An NRO account holds money you earned inside India — rent, dividends, interest, the proceeds of something you sold — and can be repatriated only up to USD 1 million per financial year, after tax has been paid and certified.
Almost every practical question a non-resident asks about investing in India resolves to that one distinction, and most people meet it for the first time when they try to move money and cannot.
What each account is for
NRE — Non-Resident External. Rupee account, funded from abroad. The balance and the interest are freely repatriable, with no annual cap and no approval needed. Interest on an NRE deposit is exempt from Indian income tax while you remain a non-resident.
NRO — Non-Resident Ordinary. Rupee account for income arising in India. Rent from a flat in Chennai, dividends from Indian shares, a pension, the sale proceeds of an inherited property — all of it belongs here. Interest is taxable in India, and repatriation is capped.
Most non-residents end up holding both, because most have both kinds of money.
The cap, precisely
Up to USD 1 million per financial year, in aggregate across all your NRO accounts, may be repatriated or transferred to your NRE account. The financial year runs April to March, the limit is tracked against your PAN, and anything above it needs prior approval from the Reserve Bank of India.
Before the money moves, the tax on the underlying income has to have been paid and certified — historically through Forms 15CA and 15CB, which from 1 April 2026 are renamed Form 145 and Form 146 under the Income Tax Act 2025. Confirm the current form numbers with your chartered accountant before filing.
Why this matters before you invest, not after
If you invest from your NRE account, the proceeds ordinarily return to it and remain freely repatriable. If you invest from your NRO account, the proceeds are NRO money and count against the annual cap when you want them out.
The investment itself may be identical. Which account paid for it is not, and it is decided at the moment the account is opened rather than at the moment you want the money.
A practical sequence
- Establish your residential status for the year in question — it is a test of days present in India, not of passport or sentiment.
- Open the accounts your money actually needs. Foreign earnings to NRE; Indian income to NRO.
- Decide which account will fund an investment before you make it, on the basis of whether you expect to take the proceeds out of India.
- Keep the paperwork. Repatriation runs on evidence that tax was paid.
Questions people ask
Can I move money from NRO to NRE? Yes, within the same USD 1 million annual limit and with the same tax certification.
Is NRE interest really tax-free? Exempt from Indian income tax while you are a non-resident. Your country of residence may still tax it — that is a question for an adviser there.
What happens when I move back to India? Your status changes and these accounts must be redesignated. Doing it late causes problems; doing it on time causes none.
Next in this series: how Indian investments are taxed for a non-resident, and what taking money out actually involves.
Before you act on any of this
This is general information about how the rules work, not investment, tax or legal advice, and not a recommendation to buy or sell anything. Your position depends on your residential status, your country of residence and your own circumstances, and the rules change. Take advice from a qualified professional in both countries before you act. Nothing here is an offer, and Redberyl Investment Managers LLP gives no assurance of any return.
Sources
- Reserve Bank of India — FEMA and NRI accounts — checked 29 September 2026
- Income Tax Department — Capital Gains — checked 29 September 2026
More in this series: NRE and NRO accounts · how the tax works · taking money out · PMS and non-residents