NRO Fixed Deposit
An NRO fixed deposit holds income earned in India, such as rent, dividends or a pension. Interest on it is taxable, and banks withhold tax at source before crediting it. An NRE deposit holds money earned abroad, its interest is exempt from Indian tax while you remain a non-resident, and the balance is freely repatriable.
Where the money came from is the first thing to establish, because it shapes both the tax treatment and what you can send abroad later.
Dhanvantri Capital Services Private Limited, known as Dhanvantree, is an AMFI-registered mutual fund and Specialised Investment Fund distributor, ARN-194216, and a distributor of portfolio management services registered with APMI, APRN10201. We are not a bank, we do not accept deposits, and we are not tax advisers. The choice is yours.
NRO, NRE and FCNR: which deposit holds what
Three accounts are available to non-residents and they are not interchangeable. The account type is decided by where the money came from, not by who holds it, so an NRI earning rent in Mumbai and a salary in Dubai will usually hold two at once.
Putting the wrong money in the wrong account is the most common opening mistake.
| Feature | NRO | NRE | FCNR (B) |
|---|---|---|---|
| Holds | Income earned in India | Income earned abroad | Income earned abroad |
| Currency | Rupees | Rupees | Foreign currency |
| Interest taxable in India | Yes | No, while you are a non-resident | No, while you are a non-resident |
| Tax withheld at source | Yes | No | No |
| Repatriation | Current income freely, balances capped | Free | Free |
| Currency risk | Rupee | Rupee | None within the deposit currency. Converting to another currency still carries exchange-rate risk |
| Joint holding with a resident | Permitted | Permitted with a close relative, on a former-or-survivor basis | Permitted with a close relative, on a former-or-survivor basis |
The usual error is routing Indian rental income into an NRE account. Banks will not accept it, because NRE credits must originate outside India. The reverse matters too: money sitting in an NRO account is not as free to leave as money in an NRE account.
Tax on NRO fixed deposit interest
Interest on an NRO fixed deposit is taxable in India in the year it accrues, whether or not you withdraw it. The bank withholds tax before crediting, at 30% plus 4% health and education cess, an effective 31.2% before any surcharge. A treaty can reduce that rate.
PAN compliance affects the rate too. How the deposit interest sits inside the rest of your return is set out in income tax on investments in India.
Surcharge is applied on your total income for the year, not on the deposit interest alone, and the rate differs between the two tax regimes at the top end.
| Total Income for the Year | Surcharge | Effective Rate with Cess |
|---|---|---|
| Up to ₹50 lakh | None | 31.2% |
| ₹50 lakh to ₹1 crore | 10% | 34.32% |
| ₹1 crore to ₹2 crore | 15% | 35.88% |
| Above ₹2 crore | 25% | 39% |
With 4% cess on top, that runs from an effective 31.2% at the base rate to around 39% under the new regime and higher still under the old one. The Income Tax Department’s rate tables carry the current figures.
Four points that catch people out.
There is no minimum before withholding starts. A resident’s bank withholds nothing until interest crosses ₹50,000 in a year. For a non-resident, withholding applies from the first rupee.
The rate is flat, not slab-based. A resident in the 5% bracket pays 5%. A non-resident has 30% withheld regardless of total income, then claims the difference back by filing a return.
Tax withheld is not the final tax. If your actual liability is lower, the excess is a refund you have to claim. If it is higher, you owe the balance at filing.
Interest accrues to the account and tax follows the accrual. A cumulative NRO deposit paying nothing out still generates taxable interest each year, and the bank still withholds.
Cutting the rate with a tax treaty
India has double taxation avoidance agreements with more than 90 countries. Where one applies, the treaty rate on interest replaces the domestic rate, and the saving is substantial. Treaty rates on interest commonly fall between 10% and 15%, against an effective 31.2% without relief.
The exact rate and the conditions attached to it differ by agreement, so check the text of the treaty between India and your country of residence rather than relying on a general figure.
The relief is not applied automatically. Your bank will apply the domestic rate unless three documents are on file before the interest is credited.
A Tax Residency Certificate from the tax authority of the country you live in, for the relevant year.
Form 10F, filed electronically on the Indian income tax portal. The bank needs the acknowledgement, not a signed paper copy.
Your PAN. Without one, withholding can run higher than 30%.
Submit them after interest has been credited and the position becomes harder to correct. Whether a bank can adjust a deduction already made depends on its own process and on whether the quarterly statement has been filed. In practice the excess is usually reclaimed by filing an Indian return for that year, which means waiting several months for a refund on money you never owed.
On ₹4,00,000 of interest, withholding at 31.2% takes ₹1,24,800. At a 15% treaty rate it would take ₹60,000. The gap of ₹64,800 can be recovered by filing a return, provided the treaty relief applies to you and your actual liability is lower than the amount withheld.
Repatriating money out of an NRO account
Two separate rules govern money leaving an NRO account, and the distinction decides whether your money faces a ceiling at all. One rule covers current income, which moves without a monetary limit. The other covers balances and asset proceeds, which are capped in dollars each year.
Current income is freely repatriable. Rent, dividends, pension and interest on your NRO deposits are current income. There is no monetary limit on sending them abroad, subject to the bank being satisfied the Indian tax on them has been paid.
NRO balances and asset proceeds are capped at USD 1 million per financial year. This covers the balance in the account itself, sale proceeds of property or shares, inherited or gifted assets, provident fund balances and insurance proceeds.
So the interest your NRO fixed deposit earns can generally leave without a ceiling. The principal, if it came from a capital source, counts against the USD 1 million.
Four rules govern that ceiling.
It is one aggregate cap. Transfers from NRO to NRE and direct remittances abroad both count against the same USD 1 million.
It runs April to March and is tracked against your PAN. Unused headroom does not carry forward.
The certificate people expect comes from the tax side, not FEMA. The Master Direction asks for documentary evidence and an undertaking from the account holder. The accountant’s certificate is a separate, income-tax requirement: Form 146, which replaced Form 15CB, filed alongside Form 145, which replaced Form 15CA. Most pages still print the old numbers.
Above the ceiling you need prior Reserve Bank approval, applied for through your bank. Section 4.1 of the Master Direction lists this expressly.
The rules sit in FEMA Notification 13/2000-RB and the Reserve Bank’s Master Direction on Remittance of Assets. Classifying a particular transfer as current income rather than a balance is not always obvious, and your bank will take a view before processing it.
What changed on 1 April 2026
The Income-tax Act 2025 replaced the Income-tax Act 1961 on 1 April 2026, and the forms used for outward remittance were renumbered. Almost every guide still online names the old forms, so a search for them will not match what the portal now shows you.
| Until 31 March 2026 | From 1 April 2026 | What It Is |
|---|---|---|
| Form 15CB | Form 146 | The chartered accountant’s certificate |
| Form 15CA | Form 145 | Your own declaration, filed online |
A remittance completed before 31 March 2026 is recorded against the old numbers. One made on or after 1 April 2026 uses the new ones. The purpose of each form is the same, though you should check the current filing instructions rather than assume every detail carried across unchanged.
Section numbers were renumbered in the same exercise. Published sources do not yet agree on the new numbers covering withholding on payments to non-residents, so this page describes the rules rather than citing a section. Confirm the current reference with a tax professional before relying on one.
NRO and NRE recurring deposits
Recurring deposits follow the same split. An NRO recurring deposit takes monthly instalments from Indian income and its interest is taxable with tax withheld at source. An NRE recurring deposit takes instalments from funds originating abroad and its interest is exempt while you remain a non-resident.
Two differences from a fixed deposit are worth knowing before you commit.
The return is lower than the rate suggests. Each instalment earns interest only for the months remaining, not for the full term, so a recurring deposit at a given rate returns less than a lump sum at the same rate.
Missing an instalment carries a charge. Terms differ by bank, and repeated defaults can lead to the account being discontinued.
Opening an NRO fixed deposit, and what the bank will ask for
An NRO fixed deposit is opened out of an existing NRO savings account, so the account comes first. Most banks allow the whole process remotely, with documents attested rather than presented in person. The attestation step is what usually delays an application, because requirements differ by bank and by country.
What is normally required:
Proof of non-resident status — a valid visa, work permit, residence permit or overseas employment contract.
Passport, including the pages showing your visa and immigration stamps.
Overseas address proof — a utility bill, bank statement or driving licence in your name.
PAN. Some banks accept a Form 60 declaration where you do not hold one, but this is not universal and withholding can be higher without PAN. Obtaining a PAN is usually worth the effort.
Attestation. Copies are normally attested by the Indian embassy or consulate, a notary, or a banker in your country of residence.
Deposits with an insured bank carry cover from the Deposit Insurance and Credit Guarantee Corporation, currently ₹5 lakh per depositor per bank, principal and interest together. DICGC’s own FAQ sets out what counts towards the limit and which deposits are excluded.
Premature withdrawal and loans against the deposit
An NRO fixed deposit can usually be broken before maturity, at a cost. Banks apply the rate that would have applied for the period the money actually stayed, then deduct a penalty. The penalty differs by bank and by product, and is quoted separately from that rate adjustment.
Some deposits are booked as non-withdrawable in exchange for a higher rate, so check the terms of the specific deposit before you need the money.
A loan against the deposit is the alternative. Rather than breaking the deposit and losing the contracted rate, you borrow against it and the deposit keeps running. Whether that works out better depends on the loan rate, any fees, and the penalty you would otherwise pay, so compare the two before deciding. The proportion of the balance a bank will lend varies, and terms for non-residents differ from those for residents. Loan proceeds also carry their own repatriation restrictions.
When you return to India
Returning to India changes your position on two separate tracks, and they do not move at the same time. Status under the foreign exchange rules turns on why you have come back. Residential status for tax turns on how many days you spent in India during the year.
Under FEMA, your residential status changes when you return to India for employment, business or an indefinite stay. At that point you are required to tell the bank, and NRE and FCNR accounts are redesignated as resident accounts, or converted to an RFC account if you want to keep foreign currency.
Under tax law, residential status is decided separately by how many days you spent in India. The general test is 182 days in the tax year. An alternative test applies at 60 days in the year combined with 365 days across the preceding four years, and for Indian citizens and persons of Indian origin that 60-day figure rises to 120 days where Indian income exceeds ₹15 lakh.
The two can diverge. You may be resident under FEMA while still non-resident for tax in the same year, or the other way round. The exemption on NRE interest follows your tax status, not your FEMA status.
Returning Indians may also qualify as Resident but Not Ordinarily Resident for a transitional period, which limits Indian tax on foreign income. The tests turn on how many of the preceding years you spent outside India, and a few days either side of a threshold can change the whole year’s position.
Frequently Asked Questions
Yes. Interest on an NRO fixed deposit is taxable in India and the bank withholds 30% plus 4% cess, an effective 31.2%, from the first rupee. There is no minimum before withholding starts, as there is for residents. A tax treaty can reduce the rate if the paperwork reaches the bank before interest is credited.
An NRO deposit holds income earned in India and its interest is taxable with tax withheld at source. An NRE deposit holds money earned abroad, its interest is exempt from Indian tax while you are a non-resident, and the balance is freely repatriable. NRO repatriation depends on whether the money is current income or a balance.
Thirty per cent plus 4% cess, an effective 31.2% where total income stays under ₹50 lakh. Above that a surcharge applies on total income, rising from 10% to 25% and taking the effective rate as high as 39%. Withholding happens whether or not you withdraw the interest.
Yes, where a tax treaty between India and your country of residence sets a lower rate on interest. Treaty rates commonly fall between 10% and 15%. The bank needs a Tax Residency Certificate, an electronically filed Form 10F and your PAN before interest is credited, and the exact rate depends on the treaty concerned.
Current income such as rent, dividends, pension and deposit interest can be remitted without a monetary limit. NRO balances and asset proceeds are capped at USD 1 million per financial year, running April to March, tracked against your PAN, with unused headroom not carrying forward. A chartered accountant must certify that Indian tax has been paid.
Form 146, the chartered accountant’s certificate, and Form 145, your own online declaration. These replaced Form 15CB and Form 15CA respectively on 1 April 2026 under the Income-tax Act 2025. Check the current filing instructions on the portal, as guidance published before that date still names the old forms.
Deposits held with an insured bank carry Deposit Insurance and Credit Guarantee Corporation cover of ₹5 lakh per depositor per bank, counting principal and interest together across all accounts at that bank. The DICGC FAQ sets out which deposits are excluded from the cover.
The exemption on NRE interest follows your tax residential status. Separately, under FEMA you must tell the bank when you return to stay, and the account is redesignated as a resident account or converted to an RFC account. The two changes can happen at different times in the same year.
Disclaimer: The views expressed here are of the author and do not reflect those of Dhanvantree. Mutual funds are subject to market risks, please read the scheme documents carefully before investing.