NRE, NRO and FCNR(B) Accounts: Which One Pays for a Bangalore Home
A non-resident Indian buying a home in Bangalore deals with three kinds of bank account: NRE, NRO and FCNR(B). Each one accepts different money, is taxed differently and has its own rule for sending funds abroad. This guide explains what the Reserve Bank of India (RBI) allows in each account and which one fits each stage of a purchase, from the booking amount to the rent and the eventual sale.
The Three Accounts in Brief
All three accounts are opened with a bank in India under the RBI's deposit rules for non-residents. NRE and FCNR(B) accounts are open to NRIs and persons of Indian origin, including OCI cardholders who live abroad. An NRO account may be opened by any person resident outside India for genuine rupee transactions.
| Feature | NRE | FCNR(B) | NRO |
|---|---|---|---|
| Currency | Indian rupees | A freely convertible foreign currency | Indian rupees |
| Form | Savings, current, recurring or fixed deposit | Term deposit only, for 1 to 5 years | Savings, current, recurring or fixed deposit |
| Usual funding | Money remitted from abroad | Money remitted from abroad | Income and dues arising in India, and remittances |
| Sending money abroad | Freely repatriable | Freely repatriable | Current income freely; other balances up to USD 1 million a financial year |
| Tax on interest in India | Exempt | Exempt | Taxable |
NRE account
The NRE (Non-Resident External) account holds foreign earnings after they are converted into rupees. Both the balance and the interest can be sent back abroad at any time. The account holder carries the exchange-rate risk, because the money is held in rupees from the day it arrives.
FCNR(B) deposit
The FCNR(B) account is a fixed deposit kept in foreign currency, for a term of one to five years. The money stays in the original currency until maturity, so a fall in the rupee does not reduce it. It suits funds set aside for a later payment, such as an instalment due in a year or two.
NRO account
The NRO (Non-Resident Ordinary) account is the rupee account for money that arises in India. Rent, dividends, pension and the proceeds of selling Indian assets are credited to it. A resident who moves abroad must have the existing savings account redesignated as an NRO account.
Which Account Pays for the Property
The RBI requires the price of a property to reach the seller through banking channels. An NRI or OCI may pay by a remittance from abroad or from funds in an NRE, FCNR(B) or NRO account. Payment by traveller's cheques or foreign currency notes is not permitted.
All four routes are lawful, but they lead to different results at the time of sale. The amount paid through a remittance or from NRE and FCNR(B) funds counts as foreign exchange brought into India. That amount can later be taken back abroad under the property rules, without using the yearly NRO limit. A purchase funded from NRO money has no such record, and its sale proceeds stay within the NRO limit.
The same logic applies to stamp duty, the registration fee and the instalments paid to a developer. Each debit should be traceable in a bank statement to the account it came from. Buyers who mix NRE and NRO money in one purchase should keep a simple schedule showing how much came from each.
Home loan repayments
A rupee home loan taken in India can be repaid by remittance from abroad or from the NRE, FCNR(B) or NRO account. EMIs paid from abroad or from NRE and FCNR(B) funds also count as foreign exchange paid for the property. The EMI calculator shows the monthly amount to plan for in each account.
Where Rent and Running Costs Go
Rent from a flat in Bangalore is income arising in India. Most landlords receive it in the NRO account, after the tenant deducts tax at source. Rent is current income, so the net amount can be remitted abroad from the NRO account without touching the USD 1 million limit.
The RBI also treats current income such as rent, dividends and pension as a permissible credit to an NRE account. Banks apply this with care and usually ask for proof that tax on the rent has been paid. Property tax, maintenance charges and repairs are local payments and can be met from either rupee account.
Sale Proceeds and the USD 1 Million Limit
When the property is sold, the route used at purchase decides how the money goes back. Sale proceeds can be repatriated up to the amount that was paid in foreign exchange or from NRE and FCNR(B) funds. For residential property, this facility covers no more than two properties.
The rest of the proceeds, including the gain, is credited to the NRO account. From there an NRI may remit up to USD 1 million in a financial year, from April to March, along with other eligible assets. A transfer from the NRO account to the NRE account is allowed within that same limit.
The bank releases the money only after the tax paperwork is filed. Since 1 April 2026, Form 145 and Form 146 have taken the place of Form 15CA and Form 15CB for these remittances. Form 146 is the chartered accountant's certificate, required when taxable remittances cross Rs. 5 Lakhs in a year and no tax officer's certificate is held.
Tax on the Interest
Interest earned on NRE and FCNR(B) balances is exempt from income tax in India while the holder remains a non-resident. Interest on an NRO account is taxable, and the bank deducts tax at source before crediting it. The exemption in India does not settle the tax position abroad, since many countries tax their residents on worldwide income. A tax adviser in the country of residence should confirm how the interest is reported there.
Joint Holders and Power of Attorney
NRE and FCNR(B) accounts may be held jointly by two or more NRIs or persons of Indian origin. They may also be held with a resident relative on a "former or survivor" basis, where the relative operates the account only as a power of attorney holder. An NRO account may be held jointly with residents on the same basis.
A resident power of attorney holder can make local payments from the account, which covers payments to a developer or seller. The holder can also remit money to the account owner abroad through the bank. The mandate does not extend to other uses, so the bank's own power of attorney format should be completed along with the property document.
Loans Against Deposits
Banks in India may lend against NRE and FCNR(B) deposits to the account holder or to a third party. Such loans must be used in India for the purposes the regulations allow, and the deposit cannot be withdrawn early while the loan runs. A loan against an NRO deposit cannot be used for investment in real estate. A buyer who plans to borrow against a deposit should confirm the permitted purpose with the bank first.
When the NRI Returns to India
A change of residence changes the accounts. On return, NRE accounts are redesignated as resident accounts, or the funds move to a Resident Foreign Currency (RFC) account if the holder prefers. FCNR(B) deposits may continue until maturity at the contracted rate. The NRO account becomes an ordinary resident account, and the bank should be told as soon as the status changes.
Checklist Before Booking
A few steps taken before the first payment keep the money trail clean:
- Open the NRE and NRO accounts with one bank well ahead of the booking date.
- Pay the booking amount and instalments by remittance or from NRE and FCNR(B) funds where possible.
- Keep the remittance advices, bank statements and the developer's receipts for every payment.
- Route rent through the NRO account and keep the tax deduction certificates from the tenant.
- Give a resident relative a bank mandate that matches the property power of attorney.
- Ask a chartered accountant to review the plan before any large transfer abroad.
The account rules are the same across India, while stamp duty, registration and project checks follow Karnataka law. Our NRI page has more for buyers based abroad.
