NRE, NRO, FCNR or a US account: what do I actually keep after US tax?
Compare the same dollars in a US savings account, a T-bill, an FCNR, NRE or NRO deposit after Indian tax, US tax with the foreign tax credit, and the rupee’s move.
How you fileFor a US citizen or a resident alien for tax (green card, or an H-1B holder who passes the substantial presence test).
Have you given the bank a Tax Residency Certificate for the treaty rate on NRO interest?The India–US treaty (Article 11) caps India’s tax on your interest at 15%. The bank needs a US residency certificate (IRS Form 6166) and its treaty declaration form.
KEEPS THE MOST AFTER BOTH TAXEST-BILL KEEPS THE MOST
$29,488
On $25,000 for 5 years at these inputs, a US Treasury bill keeps the most: $29,488 after federal tax only, $731 more than a US savings account. FCNR interest is tax-free in India, not in the US: after 24% federal and 5% state tax the FCNR deposit ends at $28,510. With the rupee falling 3.5% a year, NRE ends at $26,153 and NRO at $24,910, after 31.2% Indian tax of which the US credits 15%.
FCNR, after US tax
$28,510
NRE, in dollars
$26,153
NRO, in dollars
$24,910
Rupee at the end
₹113.79
UNDERSTAND YOUR RESULT
What each place leaves you with, in dollars, after tax and the rupee’s move
US savings or CD2.84% a year after tax
$29k
US Treasury bill3.36% a year after tax
$29k
FCNR (dollars, in India)2.66% a year after tax
$29k
NRE (rupees)4.44% a year after tax, in rupees
$26k
NRO (rupees)3.43% a year after tax, in rupees
$25k
After 5 years, $25,000 ends at $28,757 in a US savings account, $29,488 in a T-bill, $28,510 in the FCNR deposit, $26,153 in the NRE deposit, $24,910 in the NRO deposit. The rupee deposits are shown in dollars with the rupee falling 3.5% a year.
Where the money goes in a T-bill
In a US Treasury bill, $25,000 earns $5,906 of interest over 5 years, US tax takes $1,417, leaving $29,488.
Tax paid in India and in the US, by place
| Interest | Tax in India | US tax after credit | Rupee move | You end with | |
|---|---|---|---|---|---|
| US savings or CD | $5,292 | None | $1,535 | None | $28,757 |
| US Treasury bill | $5,906 | None | $1,417 | None | $29,488 |
| FCNR (dollars, in India) | $4,944 | None | $1,434 | None | $28,510 |
| NRE (rupees) | $7,686 | None | $2,229 | −$4,304 | $26,153 |
| NRO (rupees) | $7,537 | $2,352 | $1,055 | −$4,221 | $24,910 |
India taxes only the NRO interest: $2,352 at 31.2%, of which the US credits $1,131 and $1,221 is not credited. Claiming the treaty rate would leave $26,153 instead of $24,910. FCNR and NRE interest is exempt in India and fully taxed in the US.
How each place grows in dollars, year by year
US savingsT-billFCNRNRENRO
After one year a US Treasury bill leads at these inputs with $25,839; by year 5 the gap between the most and the least is $4,579. A rupee deposit’s line bends down when the rupee falls faster than its after-tax rate.
What you report to the IRS for each place
| On your US return | Counts for FBAR and Form 8938 | |
|---|---|---|
| US savings or CD | Interest, usually on Form 1099-INT | No |
| US Treasury bill | Interest, federal only; state-exempt | No |
| FCNR (dollars, in India) | Interest, usually with no 1099 from the bank | Yes |
| NRE (rupees) | Interest in dollars, usually with no 1099 | Yes |
| NRO (rupees) | Interest, plus Form 1116 for the credit | Yes |
NRE, NRO and FCNR accounts are foreign financial accounts: their balances are added to your other foreign accounts for the FBAR’s $10,000 line, which $25,000 is over on its own, and they count toward Form 8938. The FBAR and Form 8938 checker works out both.
What moves the needle
Each row re-runs the calculation with one change. Click to apply.How it's computed
FORMULA
After-tax rate = rate × (1 − Indian tax − US federal tax − state tax + foreign tax credit)
NRO credit = the smallest of the Indian tax, the 15% treaty rate, and your US tax ÷ your taxable income
NRE and NRO in dollars = amount × ((1 + after-tax rate) ÷ (1 + the rupee’s yearly fall))^years; dollar deposits = amount × (1 + after-tax rate)^years
T-bill yearly rate = (1 + quoted yield ÷ 2)² − 1, taxed federally only
- You are a US citizen or resident alien for tax and a non-resident of India. Indian rules as published on October 2, 2026: FCNR interest exempt (Income-tax Act, 2025, Schedule IV, Sl. No. 14; 1961 Act section 10(15)(iv)(fa)); NRE interest exempt (Schedule IV, Sl. No. 1; 1961 Act section 10(4)(ii)); NRO interest taxed at source (section 393(2); 1961 Act section 195). Check with a Chartered Accountant: a review of the Indian side is pending.
- Your US rate is 24% on the next dollar from 2026 brackets for $145,000 of income; the credit limit is your US tax ÷ taxable income, 18.3%. The interest is assumed to stay in that bracket. The credit does not reduce state tax or the Net Investment Income Tax; unused credit is not carried to other years here, and other foreign income that could raise the limit is left out.
- Only Indian tax at the treaty rate counts for the credit (IRS Publication 514); without the treaty claim, the tax withheld above 15% is lost here unless you reclaim it by filing an Indian return.
- Each year’s tax comes out of that year’s interest and the rest is reinvested at the same rate. Rates are treated as yearly yields; a bank that compounds quarterly or every 180 days pays slightly more.
- The rupee moves by the same share every year (3.5% here), a scenario rather than a forecast. Rupee interest is converted at each year’s end rate. A US tax effect of the currency gain or loss on the rupee principal (section 988), money-transfer costs, Indian surcharge, early-withdrawal penalties and deposit insurance are not modelled.
- This compares what the money keeps at these inputs; it is not advice to move money.
WORKED EXAMPLE · SAMPLE NUMBERS
NRO: 6.25% a year in rupees; India takes 31.2%, the US takes 24% federal and 5% state tax and credits 15%, leaving 3.43% a year in rupees. With the rupee falling 3.5% a year, $25,000 becomes $24,910 in 5 years. NRE: no Indian tax, so 4.44% a year in rupees and $26,153. FCNR: 3.75% less US tax is 2.66% a year in dollars, $28,510. T-bill: 4.42% a year less federal tax only is 3.36%, $29,488.
SOURCES
[1]Income-tax Act, 2025: section 11 and Schedule IV (Sl. No. 1, NRE interest; Sl. No. 14, carrying over section 10(15)(iv)(fa) for FCNR)Income Tax Department, Government of India[2]Income-tax Act, 2025: section 393(2), deduction of tax on payments to non-residents (formerly section 195)Income Tax Department, Government of India
[3]Convention between the United States and India for the avoidance of double taxation, Article 11 (Interest)Internal Revenue Service[4]Publication 514, Foreign Tax Credit for IndividualsInternal Revenue Service[5]Indian Rupees to U.S. Dollar Spot Exchange Rate (DEXINUS)Board of Governors of the Federal Reserve System, via FRED[6]NRI Fixed Deposit Interest Rates; FCNR (B) FD RatesICICI BankHSBuilt by Hussain Sehorewala · checked against worked examples · Oct 2, 2026
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Questions about this result
FCNR interest is tax-free in India, not in the US. India exempts it for a non-resident or a person not ordinarily resident (Income-tax Act, 2025, Schedule IV, Sl. No. 14, carrying over section 10(15)(iv)(fa) of the 1961 Act). A US citizen or resident alien reports it as interest and pays federal and state tax on it. On this page’s example, $25,000 at 3.75% for 5 years ends at $28,510 after 24% federal and 5% state tax, less than a T-bill quoted at 4.37% ($29,488).
Indian banks deduct tax at source on NRO interest paid to a non-resident at 30% plus a 4% cess, 31.2% before any surcharge (Income-tax Act, 2025, section 393(2), formerly section 195). The India–US treaty caps India’s tax on interest at 15% for a US resident who gives the bank a Tax Residency Certificate and its treaty form; tax withheld above that can be claimed back only by filing an Indian return. Check with a Chartered Accountant.
Yes, within limits. Only tax at the 15% treaty rate counts, because IRS Publication 514 treats tax above a treaty rate as refundable rather than creditable. The credit also cannot exceed the US tax on that income (the Form 1116 limit), and it does not reduce state tax or the 3.8% Net Investment Income Tax. On the example, NRO ends at $24,910 without the treaty rate and $26,153 with it.
Only if the rupee falls by less than the gap in rates. NRE interest is tax-free in India but taxed in the US, and the deposit is in rupees. On the example, $25,000 for 5 years ends at $26,153 if the rupee falls 3.5% a year, its average over 2005–2025 on the Federal Reserve’s AEXINUS series (3.7% over the last ten years), against $28,757 in a 4% savings account. If the rupee held its value, the NRE deposit would end at $31,061.
Yes. They are foreign financial accounts, so their highest balances are added to your other foreign accounts for the FBAR’s $10,000 line and they count toward Form 8938. The interest goes on your US return whether or not the bank sends a form, and Schedule B asks about foreign accounts.
The Indian side changes, the US side may too. FCNR interest stays exempt in India while you are not ordinarily resident. The NRE exemption depends on being a person resident outside India under FEMA, so once you are resident the account has to be redesignated and the interest is no longer exempt, even in your RNOR years. Check with a Chartered Accountant before the move.
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