Indian NRE and NRO Accounts: What US Expats Must Report

US citizens of Indian origin or Americans living in India often hold either NRE (Non-Resident External) or NRO (Non-Resident Ordinary) bank accounts, and the distinction matters for both Indian and US tax purposes. NRE accounts hold foreign currency converted to Indian rupees, are fully repatriable, and the interest earned is tax-free in India. For US tax purposes, that NRE interest is fully taxable as ordinary income on your US return, the same as any other foreign bank account interest. NRO accounts hold Indian-source income such as rent, dividends, and pensions, and are subject to Indian tax withholding on interest, so you can claim the Foreign Tax Credit on Form 1116 for the Indian tax withheld. Both NRE and NRO accounts must be reported on FBAR if aggregate foreign account balances exceed $10,000, and on Form 8938 above its higher separate thresholds.