NRI BANKING
NRE vs NRO Account
UK residents with financial ties to India typically need one or both of two account types: NRE (Non-Resident External) and NRO (Non-Resident Ordinary). They differ on tax treatment, repatriation rights, and what money can go in.
TL;DR
- NRE account: holds foreign earnings converted to INR, fully repatriable, interest tax-free in India
- NRO account: holds India-sourced income (rent, dividends, pension), repatriation capped at USD 1 million per year, interest taxable at 30% in India
- Most UK residents need both: NRE for sending UK earnings to India, NRO for receiving Indian-source income
- Keeping a resident savings account after becoming an NRI is a FEMA violation
- The UK-India double taxation treaty can reduce Indian withholding tax on NRO interest
Last reviewed: June 2026
What Is an NRE Account?
An NRE account (Non-Resident External) is an Indian rupee account held at an Indian bank. It holds money that originated outside India -- typically UK earnings converted into rupees at the point of deposit. Only foreign-origin funds can be deposited. Indian-source income (rent, dividends, pension) cannot be deposited directly into an NRE account.
NRE balances are freely and fully repatriable -- principal and interest can be transferred back to the UK without limit. Interest earned is exempt from Indian income tax under Section 10(4) of the Income Tax Act 1961. However, UK residents must report NRE interest to HMRC -- it is subject to UK income tax even though exempt in India.
What Is an NRO Account?
An NRO account (Non-Resident Ordinary) is the standard account for holding Indian-source income. Rent from Indian property, dividends from Indian shares, or a pension from an Indian employer all flow into an NRO account. Unlike NRE accounts, NRO accounts can receive both Indian-origin and foreign-origin funds.
Repatriation from NRO accounts is capped at USD 1 million per financial year, subject to payment of applicable taxes and submission of a CA certificate (Form 15CA/15CB). Interest on NRO accounts is taxable in India at a flat 30% plus applicable surcharge, withheld at source. UK residents must also report NRO interest to HMRC, with credit available for Indian tax paid under the UK-India double taxation treaty.
NRE vs NRO: Side-by-Side Comparison
| Feature | NRE Account | NRO Account |
|---|---|---|
| Funds source | Foreign earnings only | Indian income + foreign remittances |
| Repatriation | Freely repatriable, no limit | USD 1 million per year (after tax) |
| Indian tax on interest | Exempt | 30% + surcharge (withheld at source) |
| UK tax on interest | Taxable -- report to HMRC | Taxable (treaty credit for Indian tax paid) |
| Joint holding | NRIs only | NRI + resident Indian permitted |
| Typical use | Sending UK salary to India | Receiving rent, dividends, pension from India |
Which Account Does a UK Resident Actually Need?
Most UK residents with active financial ties to India need both. NRE for transferring UK salary or savings to India and earning tax-free rupee interest. NRO for receiving rent from Indian property, dividends from Indian shareholdings, or payments from an Indian pension. A UK resident who only sends money to India and has no Indian-source income may need only an NRE account.
The FEMA Compliance Obligation
When an Indian citizen takes up residence in the UK and becomes an NRI, existing resident savings and current accounts in India must be redesignated as NRO accounts. This is a legal obligation under FEMA, not optional. Maintaining a resident account while living in the UK constitutes a FEMA violation and can attract penalties.
Opening an NRE or NRO Account from the UK
All major Indian banks offer NRE and NRO accounts to UK residents. HDFC Bank, ICICI Bank, State Bank of India and Axis Bank all operate UK branches or have UK correspondent banking arrangements. The process can typically be completed online. Documentation requirements include proof of NRI status, proof of Indian origin or citizenship, proof of UK address, and KYC documentation.
Related Guides
Disclaimer
This guide is for general information only and does not constitute tax, legal or financial advice. Consult a qualified adviser before making decisions about Indian accounts or repatriation. Kaeltripton is an independent editorial publisher, not regulated by the FCA or any Indian authority.
Frequently Asked Questions
What is the difference between NRE and NRO account?
An NRE account holds foreign earnings converted to rupees and is fully repatriable with tax-free interest in India. An NRO account holds Indian-source income, has a repatriation cap of USD 1 million per year, and interest is taxed at 30% in India.
Which is better, NRE or NRO?
Neither is universally better -- they serve different purposes. NRE is better for parking UK earnings in India with tax-free interest and free repatriation. NRO is required for receiving Indian-source income such as rent or dividends. Most UK residents need both.
Can an NRE account be opened online from the UK?
Yes. Major Indian banks allow NRE account opening online from the UK. The process requires KYC documentation including proof of NRI status.
Is NRE interest taxable in the UK?
Yes. Although NRE interest is exempt from Indian income tax, it is taxable in the UK as foreign income and must be reported to HMRC on a self-assessment tax return.
What happens to an Indian savings account when moving to the UK?
Under FEMA, resident savings accounts must be converted to NRO accounts once you become an NRI. Continuing to operate a resident account while living abroad is a FEMA violation.
Sources
- Foreign Exchange Management Act 1999, FEMA Notification No. 5 -- Reserve Bank of India
- Income Tax Act 1961, Section 10(4) -- Income Tax Department of India
- UK-India Double Taxation Convention -- HMRC
- NRI account guidelines -- Reserve Bank of India FAQ
