NRE vs NRO income tax rules: How these NRIs, OCIs can save up to Rs 20,500 on $10,000 FD investment

Picture this: you invest $10,000 in a Non-Resident External (NRE) and Rs 9,40,000 (which is also $10,000) in a Non-Resident Ordinary (NRO) fixed deposit (FD) account, both earning the same interest rate. You could save around Rs 20,500 in taxes in India from the earnings on your NRE FD. The different tax treatment of income from NRE and NRO accounts can really help Non-resident Indians (NRIs), Overseas Citizen of India (OCI) and Persons of Indian Origin (PIOs) by allowing them to save a good chunk on taxes from their NRE deposit interest, since that income is tax-exempt. In contrast , interest earned on NRO investments is taxable in India and subject to up to 30% tax deducted at source (TDS). But can NRE account holders save this tax in all situations?

An expert analysis reveals that an NRI with both NRE and NRO accounts can save a significant amount on taxed on their NRE FD investments in India even when they invest the same amount in both NRE and NRO FDs.