NRE and NRO accounts on H-1B: the complete guide for Indians in the US

When you move to the US on an H-1B visa and become a US tax resident, your Indian bank accounts — NRE, NRO, savings — do not stay invisible to the US tax system. They come with reporting requirements, income tax obligations, and penalties for non-compliance that catch most Indian H-1B holders off guard.

This guide covers everything about maintaining NRE and NRO accounts while on H-1B or a green card: what you owe in US taxes, what you must disclose, and the practical steps to stay compliant.

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First: can you keep your NRE/NRO accounts?

Yes. Whether you can maintain an NRE or NRO account is a FEMA question (Indian law), not a US tax question.

Under FEMA (Foreign Exchange Management Act), you are a "person resident outside India" if you have gone outside India for employment. H-1B holders and green card holders who live in the US qualify as non-resident of India for FEMA purposes — you are allowed to maintain NRE and NRO accounts.

NRE account: For foreign earnings that you want to repatriate freely. H-1B salary earned in the US can be remitted to your NRE account. NRE funds are freely repatriable.

NRO account: For India-sourced income — rental income from Indian property, Indian dividends, pension, etc. NRO funds are repatriable up to $1 million per financial year (the NRI limit, not the $250,000 LRS limit which applies to resident Indians).

The US has no rule against US residents holding Indian bank accounts. Your US obligations are to report these accounts and pay tax on the income they generate.

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NRE account: US tax treatment

Interest income

NRE account interest is exempt in India under Section 10(4) of the Income Tax Act. This exemption does not apply in the US.

US rule: All worldwide income of a US tax resident is taxable in the US. NRE account interest is worldwide income. It is reported as ordinary income on Schedule B of Form 1040.

Conversion: Convert the annual interest from INR to USD using the IRS average annual exchange rate for the relevant year. The IRS publishes this rate; it is also posted by the Yearly Average Currency Exchange Rates page on irs.gov. Use this rate, not the rate on the date interest was credited.

Example: Your NRE savings account earned ₹45,000 in interest during 2026. The IRS average annual USD/INR rate for 2026 is approximately ₹84/USD. You report $536 (₹45,000 ÷ 84) as interest income on Schedule B.

At the 22% federal bracket, this creates $118 in US tax on income that paid ₹0 in India. Not large — but multiply this by ₹5L–₹10L in NRE FDs earning 7% and it becomes meaningful.

Foreign tax credit

India charges no TDS on NRE account interest (it is exempt). There is no Indian tax to credit against your US liability. You pay US tax in full.

FBAR and Form 8938

The NRE account must be disclosed on:

• FBAR (FinCEN 114): If combined foreign account balances exceed $10,000 at any point in the year
• Form 8938: If total foreign assets exceed $50,000 at year-end or $75,000 at any point (single filer, US resident)

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NRO account: US tax treatment

Interest income

NRO account interest is taxable in India. India deducts TDS at 30% on NRO interest for non-resident Indians.

NRO account interest is also taxable in the US as ordinary income (Schedule B).

To avoid double taxation: File Form 1116 (Foreign Tax Credit) and claim the Indian TDS as a credit against your US federal tax liability on that income.

Example: NRO FD interest earned: ₹1,20,000 ≈ $1,429 (at ₹84/$) India TDS at 30%: ₹36,000 ≈ $429 US tax at 22%: $1,429 × 22% = $314

Foreign tax credit: $314 (limited to US tax on this income — you cannot claim more than the US tax, even though India withheld more). The excess $115 ($429 − $314) may be carried back 1 year or forward 10 years.

Net US tax after credit: $0 (the $314 US liability is fully offset by the $314 credit) Net India tax: ₹36,000 TDS already deducted

India-US DTAA on interest

The India-US Double Tax Avoidance Agreement covers NRO interest. The DTAA does not reduce the withholding rate on NRO bank account interest (it remains at the domestic rate of 30%). However, the DTAA's non-discrimination and treaty override provisions may apply in specific situations — consult a cross-border CPA.

FBAR and Form 8938

Same as NRE — NRO accounts must be disclosed on FBAR and Form 8938 if thresholds are met.

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Fixed deposits: NRE vs NRO

	NRE FD	NRO FD
Indian tax on interest	0% (exempt under Section 10(4))	30% TDS
US tax on interest	Yes — full ordinary income rate	Yes — but credit available for Indian TDS
FBAR reportable	Yes	Yes
Form 8938 reportable	Yes	Yes
Repatriation	Freely repatriable	Up to $1M/year with CA certificate
Who should use	Foreign earnings, US salary remitted to India	India-sourced income (rent, dividends)

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The NRE account interest trap in practice

Here is how the NRE account becomes a surprise tax liability for H-1B holders:

You moved to the US in 2023. Before moving, you accumulated ₹30L in NRE FDs earning 7% — that's ₹2.1L in interest per year. In India, that ₹2.1L was entirely tax-free.

From 2024 onward (your first full year as a US tax resident), that ₹2.1L (≈$2,500) is US taxable income. At 22% federal + 5% state (approximate), that is $675 per year in additional US taxes on the NRE FD interest alone.

Over a 3-year H-1B extension, that is $2,025 in taxes that most people never planned for.

If you also have NRE FDs that matured and were renewed — the matured amount may also be an "excess distribution" from a tax-accounting perspective. Keep detailed records of every NRE FD: opening date, maturity date, interest accrued per year, and any rollovers.

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When you get a green card

Getting a green card does not change your NRE/NRO account maintenance obligations — you remain a non-resident of India under FEMA as long as you live in the US. Your NRE/NRO accounts continue as before.

What changes: Your worldwide income is now taxable in the US with no special election available. H-1B holders can sometimes choose to be treated as a non-resident alien for part of the year they arrive (dual-status return) — this election is no longer available after you have a green card.

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Returning to India: account reclassification

When you return to India permanently and become a resident under FEMA:

• NRE account must be converted to a resident savings/FD account within a reasonable time (generally 30 days of becoming FEMA resident)
• NRO account can be re-designated as a resident account or closed
• Funds in NRE account lose their repatriable status once reclassified to resident status

For US tax purposes: if you return to India and cease to be a US tax resident, your US tax obligations end on the date you leave (or the earlier date determined by your residency termination rules). Any NRE/NRO interest accrued while a US resident remains reportable on your final-year US return.

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FBAR practical guide for NRE/NRO account holders

What to report: For each account, report the maximum balance during the calendar year (not year-end balance). Convert to USD using the US Treasury year-end spot rate (published at Treasury.gov/resource-center/data-chart-center/interest-rates).

How to file: FBAR is filed online at BSA E-Filing System (FinCEN website). It is a separate filing from your tax return — you file it with FinCEN, not the IRS.

Deadline: April 15 for the prior calendar year. Automatic extension to October 15 (no extension request needed for FBAR, unlike the IRS extension).

What you need for each account:

• Full account number
• Name and address of Indian bank
• Type of account (savings, FD, current)
• Maximum value during the year (in USD)

Multiple FDs: Each fixed deposit is a separate account for FBAR purposes. If you have 5 NRE FDs, you file 5 account lines on FBAR.

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Schedule B: reporting Indian interest on your US tax return

Schedule B (Interest and Ordinary Dividends) is attached to Form 1040. For each Indian account earning interest:

1. List the name of the foreign financial institution (e.g., "SBI NRE Savings Account")
2. Enter the interest in USD (converted at IRS average rate)
3. Check the "Yes" box on Schedule B Part III indicating you had a financial interest in a foreign financial account
4. Indicate the country (India)

This is not optional. The Schedule B Part III checkbox is how the IRS cross-checks FBAR filings — if you check "Yes" on Schedule B but have no FBAR filed, it flags the return.

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Common mistakes H-1B holders make

1. Not converting NRE accounts to NRO/NRE after arrival This is actually not a mistake — H-1B holders should keep NRE accounts. The common mistake is assuming the NRE exempt status carries over to the US.

2. Not reporting NRE interest on Schedule B The most common error. NRE interest is exempt in India; people assume it is exempt everywhere. It is not.

3. Not filing FBAR because "the balance wasn't that high" The threshold is $10,000 combined across all accounts. A single NRE savings account at ₹8L (≈$9,500) plus a small NRO at ₹1L (≈$1,200) combined exceeds $10,000. FBAR required.

4. Forgetting FDs are separate accounts on FBAR Each FD is a separate account. 6 NRE FDs = 6 lines on FBAR.

5. Not claiming Form 1116 for NRO TDS If you reported NRO interest as income but didn't file Form 1116, you overpaid US tax. Form 1116 can be filed to recover the credit, subject to the 3-year amended return window.

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Related reading

• FBAR and FATCA: which Indian accounts H-1B holders must disclose
• PFIC rules for H-1B Indians: why your Indian mutual funds are a US tax trap
• H-1B to green card: how your US stock tax changes
• RSU tax for Indian employees at US tech companies
• 401(k) and IRA when you return to India