For NRIs, the account type decides the tax. NRE (rupee) and FCNR (foreign-currency) deposit interest is exempt from Indian tax under Section 10(4)(ii) and both are freely repatriable - no TDS. NRO deposit interest is taxable, with 30% TDS (plus surcharge/cess) under Section 195, reducible under a DTAA. NRIs can also hold G-Secs, T-bills and SDLs directly via the RBI Retail Direct platform under the Fully Accessible Route.
The three accounts, side by side
NRE (Non-Resident External): holds foreign earnings converted to rupees. Interest tax-free; principal and interest fully repatriable; carries exchange-rate risk. NRO (Non-Resident Ordinary): holds India-source income such as rent, dividends and pension. Interest taxable at 30% TDS; repatriation capped at US$1 million per financial year with Form 145/146 (formerly 15CA/15CB). FCNR (Foreign Currency Non-Resident): held in foreign currency; interest tax-free; fully repatriable; no exchange-rate risk on maturity.
Government securities for NRIs
Since the Fully Accessible Route (FAR) and the RBI Retail Direct scheme, NRIs and OCIs can buy G-Secs, State Development Loans and Treasury Bills directly - with no investment limit on FAR securities and zero brokerage. You need a PAN, an NRO savings account with net-banking/UPI, and an Aadhaar-linked Indian mobile number. Sovereign Gold Bonds and floating-rate bonds remain outside this route.
Cutting the NRO tax with a DTAA
Where NRO interest is taxed at 30%, the Double Taxation Avoidance Agreement between India and your country of residence can lower it - for example, the India-UAE DTAA caps interest tax at 12.5%. You claim the lower rate with a Tax Residency Certificate and Form 10F.
Choosing in practice
Park foreign income you may repatriate in NRE/FCNR (tax-free, repatriable); keep India-source income in NRO; use FCNR if you want to avoid rupee depreciation. RTA & Associates note on timing deposits to rate cycles: Locking in high FD and G-Sec rates. See also our NRE vs NRO vs FCNR explainer and NRI tax advisory service.
How NRI Blueprint helps
We structure your deposit mix for tax and repatriation, apply the right DTAA relief, and set up Retail Direct for G-Secs. Book a strategy call.