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Confused about NRE and NRO tax rules? Here are all your NRI banking FAQs answered

Key Takeaways

  • Key Takeaway ImageIf you’re unsure when or how taxes apply to your Indian income as an NRI, these NRI banking FAQs can help you navigate the essentials.
  • Key Takeaway ImageLearn why interest earned on NRE accounts is tax-free in India while NRO account income is taxable under specific rules.
  • Key Takeaway ImageDiscover how repatriation, TDS deductions, and income tax rules for NRI account holders affect your overall tax obligations.
  • Key Takeaway ImageExplore how IDFC FIRST Bank NRI Banking Solutions simplify account management, tax documentation, and seamless fund transfers.
05 Jul 2025 by Team FinFIRST
NRI banking FAQs on tax rules
Open an Account

Managing your finances in India while living abroad can feel complicated, especially when taxes come into the picture. Do you need to file an income tax return in India? Is your NRE account interest taxable? How can you avoid double taxation on your Indian income?

If you’ve been seeking reliable, clear answers, these NRI banking FAQs are here to simplify things. Have all your questions answered in one place to clear any confusion and stay compliant while making the most of your Indian bank accounts and investments.

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Frequently Asked Questions

Is interest on my NRE account taxable in India?

This is one of the most common queries, as understanding interest taxation on NRE accounts is crucial for financial planning.

No, interest earned on Non-Resident External (NRE) accounts is tax-free in India. Both the principal and interest are fully repatriable.

Smart move: Open an IDFC FIRST Bank NRE Savings Accountand enjoy tax-exempt returns up to 7.00% p.a., daily interest accrual, monthly payouts, and seamless international fund transfers without fees.

How is interest on my NRO account taxed?

Interest from Non-Resident Ordinary (NRO) accounts is taxed at a flat 30% TDS (plus surcharge and cess), irrespective of your income tax slab in India.

Account type

Purpose

Tax on interest (India)

NRE

For foreign income remitted to India

Tax-free

NRO

For Indian income, like rent, pension, investments

30% TDS (plus surcharge and cess)

This distinction between NRE vs NRO tax is essential for NRIs to manage their accounts effectively.

Tip: With an IDFC FIRST Bank NRO Savings Account, you can earn up to 7.00% p.a. while repatriating up to USD 1 million annually after taxes.

Do NRIs need to file a tax return in India?

Yes, under income tax rules for NRI account holders, you must file a return if:

  1. Your taxable Indian income exceeds ₹2.5 lakh in a financial year
  2. You earn taxable capital gains
  3. You wish to claim a TDS refund
  4. You want to avail benefits under a Double Taxation Avoidance Agreement (DTAA)

Pro tip: Use the IDFC FIRST Bank Mobile Banking App to download TDS certificates and account statements for easier tax filing.

What is DTAA, and how can NRIs benefit?

The Double Taxation Avoidance Agreement (DTAA) prevents you from being taxed twice on the same income in India and your country of residence.

Example: An NRI in the UK earning ₹5 lakh as NRO interest pays 30% TDS in India but can claim this as a tax credit when filing UK taxes.

DTAA benefits are a frequent topic as they help ease the burden of double taxation.

Ease your process: IDFC FIRST Bank ensures easy access to tax certificates and DTAA forms for its NRI customers.

How is TDS deducted from NRO accounts?

 

Income type

TDS rate

NRO interest

30%

Rent

30%

Short-term capital gains (equity MFs, shares)

20%

Long-term capital gains

12.5%-20%


Claiming a refund: File an income tax return to claim any excess TDS deducted. You can also apply for a lower TDS certificate under Section 197 using Form 13.

How are capital gains from Indian investments taxed for NRIs?

Asset type

Short-term tax

Long-term tax

Equity mutual funds/shares

20%

12.5% (above ₹1.25 lakh)

Property

30%

20% with indexation

 

NRI taxation differs from resident taxation, particularly in the case of capital gains. Always check the holding period to determine whether gains are short-term or long-term.

How do I confirm my NRI residential status for tax purposes?

You qualify as an NRI if:

●  You stay less than 182 days in India during a financial year, or

●  You have stayed under 365 days in the past 4 years and less than 60 days in the current year

What is FATCA, and how does it affect me?

The Foreign Account Tax Compliance Act (FATCA) requires Indian banks to report account details of NRIs to their respective tax authorities abroad basis their country of tax residence.

Action: Declare overseas tax residency during account opening and update in case of any change in tax residency status/ jurisdiction in order to avoid compliance issues. IDFC FIRST Bank follows fully FATCA-compliant processes for NRI customers.

How much money can I repatriate from India?

  • NRE funds: Fully repatriable.
  • NRO funds: Up to USD 1 million per financial year, subject to tax documentation and clearances.

Pro tip: Manage your repatriations through IDFC FIRST Bank’s secure mobile and net banking for easy and compliant money transfers.

FAQs answered. What’s next?
 

This NRI banking FAQs guide should clarify your common tax queries and help you handle your Indian accounts confidently. From understanding NRI account tax in India to knowing when your foreign income is taxable in India, staying compliant and maximising your financial advantages is crucial.

Why NRIs prefer IDFC FIRST Bank NRI banking
 

  1. Tax-free returns up to 7.00% p.a. on NRE accounts
  2. Seamless fund repatriation globally
  3. 24/7 mobile and net banking for easy fund management
  4. Tax documents, TDS certificates, and DTAA support

If you’re navigating NRI taxation, open an IDFC FIRST Bank NRI Savings Account today and manage your Indian finances securely and smartly.

What makes IDFC FIRST Bank NRI Banking stand out?
 

  1. A range of savings and deposit accounts
  2. Interest of up to 7% p.a. with monthly credits
  3. Zero charges on over 30 savings account services
  4. IDFC FIRST Bank mobile app for all your banking services
  5. A dedicated relationship manager for all your needs
  6. 360-degree digital onboarding and customer service
  7. Recognised among the World’s Best Banks 2025 by Forbes in partnership with Statista
  8. Wide range of NRI services, including remittances, investments, and more

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.

The features, benefits and offers mentioned in the article are applicable as on the day of publication of this blog and is subject to change without notice. The contents herein are also subject to other product specific terms and conditions and any third party terms and conditions, as applicable. Please refer our website www.idfcfirstbank.com for latest updates.

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