Taxability of Interest — NRE vs NRO (Quick Guide)
NRE Account
- Interest on NRE balances is not taxable in India.
- Full repatriation allowed for both principal and interest.
NRO Account
- Interest is taxable in India; banks deduct TDS at 30% plus surcharge & 4% cess.
TDS guide on NRO interest
• ≤ ₹50 lakh: 31.2% (30% + 4% cess)
• ₹50 lakh–₹1 crore: 34.32% (30% + 10% surcharge + 4% cess)
• > ₹1 crore: 35.88% (30% + 15% surcharge + 4% cess)
• ≤ ₹50 lakh: 31.2% (30% + 4% cess)
• ₹50 lakh–₹1 crore: 34.32% (30% + 10% surcharge + 4% cess)
• > ₹1 crore: 35.88% (30% + 15% surcharge + 4% cess)
- Repatriation — Interest: freely repatriable after tax.
- Principal: generally up to USD 1 million per financial year with documentation & applicable taxes.
NRE vs NRO — Tax, Repatriation & Documentation
| Aspect | NRE Account | NRO Account |
|---|---|---|
| Interest Taxability (India) | Interest is not taxable in India.: | Interest is taxable at base 30% + applicable surcharge & 4% cess (TDS). • ≤ ₹50 lakh: 31.2% TDS • ₹50 lakh – ₹1 crore: 34.32% TDS • > ₹1 crore: 35.88% TDS |
| Repatriation | Full repatriation of principal & interest. | Interest: freely repatriable after tax. Principal: generally up to USD 1 million per FY (with documentation & taxes). |
| Documentation (Transfers) | — | For NRO → NRE transfers, typical compliance includes: • CA Certificate Form 15CB • Online submission of Form 15CA:contentReference[oaicite:5]{index=5} |
Tax Treatment Overview
- NRE: Interest is exempt in India; funds are fully repatriable.
- NRO: Interest is taxable; TDS applies at the rates above.
Key Considerations (Compliance)
- For NRO → NRE transfers, typical requirements include: Form 15CB (CA certificate) and online Form 15CA submission.
- Consider professional advice for DTAA relief and documentation.
How It Works — From Account to Repatriation
- Open Account → Choose NRE (foreign income) or NRO (Indian income)
- Earn Interest → Bank credits interest periodically
- Tax Status → NRE interest: tax-free in India; NRO interest: TDS as per slab
- Repatriation → NRE: fully free; NRO: interest freely after tax, principal generally up to USD 1M/FY
- Compliance Forms → For NRO → NRE: Form 15CA (online) + Form 15CB (CA certificate)
Case Study — ₹12,00,000 NRO Interest: TDS & Repatriation
Scenario: An NRI earns ₹12,00,000 as NRO interest during the financial year.
- Applicable TDS Slab: ≤ ₹50 lakh → 31.2% (30% + 4% cess).
- TDS Amount: ₹12,00,000 × 31.2% = ₹3,74,400
- Net Interest (post-TDS): ₹12,00,000 − ₹3,74,400 = ₹8,25,600
- Repatriation: Interest can be sent abroad after tax; for principal transfers from NRO, repatriation is generally allowed up to USD 1 million per FY with compliance.
- Compliance: Bank/authorised dealer may require Form 15CA (online) and Form 15CB (CA certificate) before outward remittance to NRE/overseas.
FAQs — NRE & NRO Taxability
Is NRE account interest taxable in India?
No. Interest on NRE accounts is not taxable in India; both principal and interest are fully repatriable
What is the TDS rate on NRO account interest?
Banks deduct TDS on NRO interest typically at 30% plus applicable surcharge and 4% cess: 31.2% (≤ ₹50L), 34.32% (₹50L–₹1Cr), 35.88% (> ₹1Cr).
Can I transfer money from NRO to NRE without paying tax?
Interest becomes freely repatriable after tax deduction. Principal repatriation from NRO is generally allowed up to USD 1 million per FY, subject to tax compliance and documentation.
What forms are needed for NRO to NRE transfer?
Typically Form 15CA (online submission to the Income Tax Department) and a CA certificate in Form 15CB.