Last checked 25 September 2026
If you are sending money to India and your recipient has given you a choice of two account numbers, this is the most consequential decision in the whole transfer — more than the provider, more than the rate. NRE money can come back out of India freely and its interest is tax-exempt. NRO money cannot and is not. Send to the wrong one and no provider, rate or complaint fixes it afterwards.
The good news is that the rule is short, and it is set by the Reserve Bank of India rather than by any bank, so it does not vary between them.
The difference in one table
| NRE — Non-Resident External | NRO — Non-Resident Ordinary | |
|---|---|---|
| What it is for | Money earned outside India | Money earned inside India |
| Can the money leave India again? | Yes, freely | Not freely — see the USD 1 million rule below |
| Tax on interest | Exempt from income tax | Taxable |
| Who can open one | NRIs and PIOs | Any person resident outside India |
Two rows of that table are the reason this page exists. Everything else follows from them.
The short answer
If you are sending money you earned abroad, and there is any chance that money may need to come back out of India later — send it to the NRE account.
That is the default, and most people sending from Germany, the UK, the US or Canada want it. It is money that started outside India, and NRE is the account designed to let it leave again.
NRO is the right answer in one main situation: the money is destined for Indian expenses, or it will mix with income arising in India — rent from a flat, a pension, dividends, a share of a family business. Those things are NRO money by nature, and RBI’s permitted credits for an NRO account are exactly that: inward remittances, legitimate dues in India, and transfers from other NRO accounts.
Repatriation: the part that bites years later
RBI’s position on an NRE account is that the balance is repatriable. Principal and interest, out of India, without asking anyone.
An NRO account is not repatriable except for current income. There is a route out, but it is a capped and documented one: an NRI or PIO may remit up to USD 1 million per financial year — April to March — from NRO balances, and that allowance is shared with their other eligible Indian assets.
For most families sending ordinary support, a million dollars a year is not a live constraint, and this all sounds academic. It stops being academic the moment someone sells a property, settles an estate, or decides to move savings back after a decade abroad. Money that went into NRO because it was easier at the time now has to come out through a capped, paperwork-heavy channel — and money that went into NRE does not.
That asymmetry costs nothing to respect on the day you send, and it cannot be undone cheaply later.
Tax: exempt versus taxable
Interest earned on an NRE account is exempt from income tax, and RBI notes the balances are exempt from wealth tax. Income in an NRO account is taxable.
On a balance that sits for a year or more, that is not a rounding difference. Two accounts at the same bank, the same rate, the same deposit — one keeps the interest, the other does not.
This is about the tax treatment of the account, not about whether your transfer is taxable. Whether money you send is itself taxed in the recipient’s hands is a separate question with separate rules, and it is not what this page answers.
What can legitimately go into each
Worth knowing, because it explains why the accounts are not interchangeable rather than simply differently taxed.
- NRE permitted credits — inward remittance from outside India, interest accruing on the account, transfers from other NRE or FCNR(B) accounts, and current income such as rent, dividend and pension.
- NRO permitted credits — inward remittances from outside India, legitimate dues in India, transfers from other NRO accounts, and rupee gifts or loans from residents within the Liberalised Remittance Scheme limits.
Notice that an inward remittance is permitted into both. That is precisely why the mistake is so easy to make: nothing rejects your transfer, nothing warns anyone, and the money lands exactly as expected. The consequences are entirely downstream.
Notice also what is not a permitted NRE credit: Indian income. Rent from an Indian flat belongs in NRO. Trying to route it through NRE to make it repatriable is not a clever workaround, it is outside the rules.
One more rule worth knowing before you send
RBI’s FAQ notes that individuals and entities of Pakistan and Bangladesh require prior approval of the Reserve Bank of India to open these accounts. If that applies to anyone in your situation, resolve it before money is in motion rather than afterwards.
How to make sure it lands in the right one
The two accounts have different account numbers. Your recipient may have both at the same bank, and the numbers may look alike.
- Ask which account type the number belongs to. Do not infer it, and do not accept “my account at HDFC” as an answer.
- Ask for it in writing — a screenshot of the account summary in their banking app naming NRE or NRO.
- Check that the name on the account matches what you are entering.
- If you send regularly, save the beneficiary once, correctly, and reuse it.
If money has already gone to the wrong one, this is not a transfer problem and your provider cannot help — the money arrived where you told it to go. It is a banking question for the account holder, and banks do offer NRO to NRE transfer processes, subject to documentation and the repatriation rules above. Start there, and start early.
A separate question people often fold into this one is whether the money is taxable when it arrives. It usually is not, because gifts from close relatives are exempt — but the definition of “relative” is narrower than most people assume. See is money sent to India taxable.
A note on UPI
If your reason for asking is that you want to pay things in India directly from abroad rather than send money to someone, that runs on these same two account types — and it is available in far fewer countries than people assume. We set out which, and what it can and cannot do, in can you actually use UPI from abroad.
Questions people ask
Which account should I send my salary savings to?
NRE, in almost every case. It is money earned outside India, and NRE keeps it freely repatriable with tax-exempt interest.
Can I send an international transfer to an NRO account?
Yes — inward remittances are a permitted credit to NRO. The question is not whether you can, but whether you should, given the money then loses free repatriability and the interest becomes taxable.
How much can come out of an NRO account?
Current income is remittable. Beyond that, an NRI or PIO may remit up to USD 1 million per financial year from NRO balances together with their other eligible assets.
Is NRE interest really tax-free?
RBI states that income earned in NRE accounts is exempt from income tax and the balances are exempt from wealth tax. How that interacts with tax where you live is a separate matter and depends on your own country’s rules.
My relative only has one account — does this matter?
Then find out which type it is. If it is a resident savings account rather than NRE or NRO, that is a different question again and one for them to raise with their bank, because account status is supposed to follow residential status.
How we checked this
Read on 25 September 2026: the Reserve Bank of India’s FAQ on accounts for non-residents, for who may open each account type, the permitted credits to each, the repatriability of NRE balances, the position that NRO balances are not repatriable except for current income, the USD 1 million per financial year allowance shared with other eligible assets, the tax exemption on NRE income and wealth, the taxability of NRO income, and the prior-approval requirement for individuals and entities of Pakistan and Bangladesh.
We have used RBI’s own wording rather than any bank’s summary of it, because banks describe their products and RBI describes the rule.
Afromium does not make test transfers and does not give tax or investment advice. This page sets out what RBI publishes about two account types, read on the date above. Rules and limits change, and your own country’s tax treatment is a separate matter — check the current position with the receiving bank, and take professional advice where a large sum or a property sale is involved.