Deposits Compared After Both Countries' Tax

The headline rate on an Indian deposit is a rupee rate before any tax. What a US tax resident keeps is a dollar amount after Indian tax, US tax and the rupee's move against the dollar, and those three can turn a rate that looks twice as good into one that is worse. This chapter compares the five places Indian households in the US usually park cash: a US savings account, a US Treasury bill, an FCNR(B) dollar deposit, an NRE rupee deposit and an NRO rupee deposit. It shows how to compare them after both countries' tax, and which assumptions decide the winner. Chapter 7 goes deeper on the currency; the NRE, NRO and FCNR after-tax calculator runs the full comparison with your own numbers.

What each account is

The Reserve Bank of India describes the accounts in its FAQ on accounts held by non-residents (as on 16 January 2025).

• NRE (Non-Resident External). A rupee account for money brought in from abroad. Balances and interest can be sent back abroad freely. Fixed deposits run from one to three years, and banks may accept longer.
• NRO (Non-Resident Ordinary). A rupee account for money that arises in India: rent, dividends, pension, sale proceeds and your old resident balances. Current income can be sent abroad; other balances only within $1,000,000 per Indian financial year, with other eligible assets.
• FCNR(B). A term deposit in a foreign currency such as the US dollar, for terms of one to five years.

Tax in India

The Income-tax Act, 2025 lists the Indian treatment.

• NRE interest is not included in total income if you are a person resident outside India under the exchange control law (Schedule IV, serial 1; formerly section 10(4)(ii)). The test is FEMA status, not tax status, so it ends when you become resident for FEMA purposes, even if you are still not ordinarily resident for tax.
• FCNR(B) interest is described by the RBI as exempt. Schedule IV, serial 14 of the 2025 Act refers back to the old exemption in section 10(15)(iv)(fa) of the 1961 Act by number. The conditions sit in the repealed 1961-Act clause, which this edition did not read at an official source, so have a Chartered Accountant confirm who qualifies before you rely on it.
• NRO interest is taxable, and the bank deducts tax at source under section 393(2) at "rates in force" (the Finance Act 2026 sets the base rate; 31.2% is that rate plus cess, before surcharge).

Tax in the United States

A US resident is taxed on all of it, as ordinary interest, at the top bracket reached. India's exemption does not carry over: NRE and FCNR interest is fully taxable on the US return, and with no Indian tax paid there is nothing to credit. On NRO interest, the credit is limited to the treaty rate of 15% (India-US treaty, Article 11(2)(b); IRS Publication 514), so a bank that withheld more than that leaves you with tax you cannot credit unless you claim it back in India. The income tax is on the interest alone: the rupee's fall against the dollar over the year does not reduce it.

A single filer with $150,000 of income is in the 24.0% bracket. The examples below use that bracket for US federal tax and ignore state tax.

The comparison

All five start with the same amount of money, held for five years. The assumptions are illustrative; the tool lets you replace every one.

• US savings account: 4.0% a year.
• FCNR(B) in dollars: 3.8% a year.
• NRE rupee deposit: 6.0% a year, with the rupee falling against the dollar at about its 2005 to 2025 average pace, 3.48% a year (chapter 7).
• NRO rupee deposit, treaty rate claimed: the same 6.0%, with India taking the treaty rate and the US taxing the rest.
• NRO rupee deposit, bank's default deduction not reclaimed: the same 6.0%, with the full default deduction in India and a US credit for only the treaty-rate share.

For each place the example takes the rate after tax and, for the two rupee products, divides by the rupee's fall to get a dollar rate. Dollar accounts keep the whole rate after US tax. The NRE deposit loses a quarter of its interest to US tax and then the rupee's fall. The NRO deposit with the treaty claimed ends up the same as NRE, because India's tax at the treaty rate is credited in the US and the two systems together take the same as the US bracket alone. The NRO deposit with the default deduction left as it is does worst: it pays the Indian rate, receives a credit for only the treaty share, and also pays US tax on the rest.

Starting with $25,000 for 5 years, the savings account ends at $29,038, the FCNR deposit at $28,827, the NRE deposit at $26,327 and the NRO deposit with the default deduction at $25,125. The rupee deposits advertise the largest rate and finish last, because the rupee's fall takes more than the rate gap gives. The NRO deposit with the treaty claimed ends where the NRE deposit does.

A US Treasury bill belongs on the same list. It carries no currency risk and no Indian tax, and its yield moves with US short-term rates. The HYSA vs T-bill calculator compares them on their own.

What decides the winner

Change one assumption and the order changes, which is why a single "best account" answer is wrong.

1. The rupee's fall. The rupee deposit wins when the gap between the rupee rate and the dollar rate, after tax, is larger than the rupee's fall. At a steady rupee, NRE can lead. Chapter 7 shows the slowest and fastest five-year stretches on record.
2. Where the money will be spent. Money you will spend in India does not have to be converted. The tool answers both ways.
3. Whether the treaty is claimed. For NRO, this is the biggest single lever, and it is under your control (chapter 2).
4. Your bracket and state. A higher bracket shrinks every after-tax rate, rupee and dollar alike.
5. The term and the exit. FCNR(B) and NRE fixed deposits have terms and penalties for early withdrawal; savings accounts do not.

What to keep in mind

• Every Indian account in this chapter is a foreign account on your US reports. The FBAR threshold is $10,000 in total at any time in the year, and the Form 8938 thresholds are higher. The FBAR and Form 8938 checker adds them up.
• NRE and FCNR(B) are for money that keeps its repatriable character: inward remittances, the account's own interest and the like. The RBI FAQ lists the permissible credits for each account, so check it before moving money between accounts.
• When you return to India for good, the RBI says NRE accounts should be redesignated as resident accounts, or the funds moved to a resident foreign currency account, immediately on return for employment or on a change of status, and FCNR(B) deposits may run to maturity at the contracted rate. The RNOR timeline calculator shows the tax-year dates.