Will my NRO TDS change once I'm resident?

The flat NRO-specific TDS rate no longer applies once the account is redesignated. That doesn't mean your interest becomes TDS-free, though: resident interest income falls under Section 194A instead, which only kicks in once your interest from a single bank crosses a threshold in a financial year. It isn't a blanket exemption, just a different regime with its own limit.

What happens to my repatriation limits once I'm a resident?

The USD 1 million NRO cap no longer applies to you, but you're not left with unlimited outward remittance either. As a resident, you'd use the Liberalised Remittance Scheme instead, which caps outward transfers at USD 250,000 per financial year.

What happens to NRE and NRO accounts on return to India

Q: Does my NRE interest stay tax-free during the RNOR period?

No. The NRE exemption is tied to your FEMA status, not your RNOR status, so it generally ends when your NRE account is redesignated. FCNR and RFC account interest, on the other hand, stays exempt through your RNOR period specifically.

If you are an NRI returning to India, your NRE and NRO accounts need to be converted upon your return.

RBI requires your bank to redesignate them, and holding onto the wrong account type afterward is a FEMA contravention.

This guide covers what happens to your NRE, NRO, and FCNR accounts, when RBI requires the conversion, and when your tax status actually shifts.

What happens to your NRE account
What happens to your NRO account
What happens to your FCNR deposits
When do you become a tax resident
Checklist: what to do when you return

What happens to your NRE account

Your bank has to move your NRE account out of NRE status once you return for employment, business, or any reason that shows you intend to stay for an uncertain period. A short visit doesn't trigger this.

The redesignation is meant to happen immediately once that intent is established.

For your savings balance, you have two options:

Convert it to a regular resident savings account
Transfer the funds into an RFC (Resident Foreign Currency) account, if you're eligible

Note: An RFC account lets you hold foreign currency without converting it to rupees, even after you're a resident. It's the option most returning NRIs with US stocks, RSUs, or other foreign holdings actually want.

What happens to your NRE fixed deposits

If you already have an NRE fixed deposit running, it doesn't get broken. RBI's deposit rules let it continue at the same contracted rate through its full tenure, even after the account itself is redesignated.

There's one exception. If you convert the deposit directly into an RFC account immediately on return, and it hasn't run for at least a year yet, the bank can cap the interest at the RFC savings rate instead of your contracted rate. Past the one-year mark, the contracted rate applies regardless.

The deposit continuing doesn't protect the tax treatment, though.

NRE interest is exempt only because the account holder is a "person resident outside India" under FEMA. The moment that status changes, the exemption stops, whether or not you touch the deposit.

The FD keeps earning at its contracted rate, but the interest from your date of status change onward becomes taxable.

Example

Suppose you have an NRE fixed deposit of ₹40 lakh at 7% per annum, opened in 2023 for a five-year term maturing in 2028. You return to India for good in August 2026.

The deposit itself is untouched. It keeps earning 7% until it matures in 2028, exactly as contracted.
Interest earned up to your date of return (roughly April to August 2026) stays exempt, since you were still a non-resident for that period.
Interest earned from August 2026 onward becomes part of your taxable income for the year, at your applicable slab rate, even though the FD itself hasn't changed at all.

The result: you don't lose the rate you locked in, but you do start paying tax on the same deposit partway through the year your status changes.

What happens to your NRO account

Your NRO account gets redesignated as a resident account on the same trigger as your NRE account: returning with the intention to stay in India for an uncertain period.

This is a smaller change in practice. NRO interest was already taxable while you were an NRI. What actually shifts is everything built around your non-resident status specifically, like the USD 1 million annual repatriation cap and the paperwork tied to it.

As a resident, that specific NRO-linked cap no longer applies.

That doesn't mean unlimited outward remittance, though. As a resident, outward transfers now go through the Liberalised Remittance Scheme (LRS) instead, capped at USD 250,000 per financial year.

What happens to your FCNR deposits

FCNR deposits work the same way as NRE fixed deposits. If you already have one running, RBI allows it to continue until maturity at the original contracted rate, if you want to let it run its course.

At maturity, it converts into either a resident rupee account or an RFC account, your choice.

When do you become a tax resident

This is the part people mix up with the account conversion above, and it runs on a completely different clock.

Your bank redesignates your accounts based on your intent to stay. The Income Tax Department decides your tax residency based on how many days you're actually present in India, counted separately for each financial year. The two dates are rarely the same.

Under Section 6 of the Income Tax Act, you become a resident for a financial year if either:

You're in India for 182 days or more that year, or
You're in India for 60 days or more that year, and 365 days or more across the preceding four years

If you qualify as a resident, the next question is whether you also qualify as RNOR (Resident but Not Ordinarily Resident). This is a transitional status that keeps your foreign income out of Indian tax as long as it isn't received in India or earned from a business you control from India.

You're RNOR if you meet either of these:

You were non-resident in 9 of the preceding 10 financial years, or
You spent 729 days or less in India across the preceding 7 years

For most returning NRIs, this gives a window of roughly two to three years where your foreign income stays untaxed in India, even though you're technically a resident. It's reassessed every financial year.

Note: From FY 2026-27, this same test lives under Section 6(13) of the new Income-tax Act, 2025 instead of Section 6(6) of the 1961 Act. The criteria haven't changed, only the section number.

RNOR status also decides how long your FCNR and RFC account interest stays tax-free. That exemption tracks your RNOR period, so it can run longer than the NRE exemption, which stops as soon as your FEMA status changes.

To learn more about your resident status in India and how it changes, read our Tax Residency Guide.

Checklist: what to do when you return

Inform your bank of your change in residential status as soon as your return isn't a short visit, since there's no published grace period and continuing to operate the wrong account type is a FEMA contravention
Decide between converting your NRE account to resident status or moving it into an RFC account
Let your NRO account get redesignated, since there's no real choice to make here
Decide whether to let existing FCNR and NRE fixed deposits run to maturity at their contracted rates
If you hold shares directly through a PINS-linked NRI trading and demat account, get in touch with your broker to open a resident demat account and transfer your holdings, since the NRI PINS account has to be closed
Track your day count separately for RNOR purposes, since your bank won't do this for you

About Paasa

Paasa is a global investing platform built specifically for Indian residents and returning NRIs. We provide direct access to over 10 global exchanges, so the transition covered in this article doesn't have to mean untangling your finances from scratch.

Global portfolio continuity: Your RSUs, US stocks, and other global holdings stay in one place through the transition, so redesignating your NRE and NRO accounts doesn't force you to unwind a portfolio spread across separate platforms.
The Compliance Advantage: Paasa provides the exact reports you need for your Indian tax returns and foreign asset disclosures, which matters most during the RNOR window this article covers, when what gets reported and when genuinely changes your tax outcome.
Guided transition support: If you're unsure how to sequence your account conversions and holding transfers, Paasa's team can walk through the timeline with you instead of leaving you to work out the FEMA and RNOR clocks alone.

Frequently Asked Questions

Do I have to convert my NRE account the day I land in India?

No. The trigger is intent to stay for an uncertain period, not the date you land. A short visit doesn't require conversion. Once you're back for employment, business, or indefinitely, the conversion is meant to happen promptly, and there's no published grace period to fall back on.

What happens to an NRE fixed deposit that's still running when I return?

It continues at its original contracted rate until maturity. The account label changes, but the deposit itself doesn't get broken. The interest earned from your date of status change onward becomes taxable, even though the rate stays the same.

What happens to money already sitting in my NRO account after I become a resident?

The account is redesignated as a resident account. The money itself doesn't move or get taxed differently at that moment, since NRO interest was already taxable.

Does my NRE interest stay tax-free during the RNOR period?

Converting NRE and NRO accounts when you return to India