Common Mistakes NRIs Make When Opening NRE Accounts
Neha Navaneeth
Marketing & Content Associate
Dec 11, 2025
Opening the NRE account is simple, but some common NRE account mistakes can delay or restrict transactions. Many issues occur from confusion between NRE/NRO accounts, misinterpretations of eligibility, or overlooking compliance, like FATCA/CRS submissions.
NRIs should understand these requirements to avoid account freezing, reject remittances, unnecessary penalties, and delays in fund transfers. Read the common mistakes NRI can make to open NRE accounts below.
Top 10 NRE Account Opening Mistakes That NRIs Should Avoid
Mistakes while opening an NRE account can lead to the hidden costs, compliance issues, and operational problems. Here are the NRE account mistakes to avoid:
Mistake 1: Confusing NRE vs NRO
Many NRIs misunderstand the purpose of NRO and NRE accounts, which leads to tax implications and financial planning. You should know the difference between these accounts. The NRE account is tax-free and repatriable in India, and suitable for income earned abroad. NRO account is partially repatriable (up to USD 1 million/year, subject to taxes). Only interest earned on NRE is tax-free (if NRI status is maintained); NRO interest is taxable.
Mistake 2: Using Ineligible Funds
Another common mistake is to deposit the Indian sourced income, like dividends or rent, into an NRE account, which only accepts foreign earnings. To stay compliant, you should route all India source income to the NRO account.
Mistake 3: Not Updating KYC
NRIs often forget to update KYC and contact details, including overseas email, address, and phone number. To avoid this mistake, you should submit the change in your residency status and update KYC with the bank. Non-updated KYC can result in account restrictions, freezing, or the account being rendered inoperative.
Mistake 4: Ignoring FATCA/CRS Declarations
Another common NRE account mistake that NRIs make is opening the NRE account without complete FATCA/CRS declarations. Incorrect notarisation or embassy attestation is a common mistake made by NRIs. Attestation requirements vary by bank. Depending on the bank, documents may need to be attested by the Indian embassy/consulate or a registered notary in the country of residence. NRIs should follow the specific attestation guidelines provided by their bank to avoid delays.
Documents such as the address proof, remittance declarations, or signature proofs should follow these guidelines. To avoid the delays, the NRI must follow the embassy/notary checklist provided by the bank before sending documents through courier. Cross-check each form, ensure that all signatures match, and confirm the attestation stamps.
Mistake 5: Choosing Based Only on Interest Rates
Many NRIs can choose the bank on the basis of the slightly higher NRE FD rates, but it backfires. A small rate difference like 6.8% vs 7.1% is lost to higher conversion markups, weak digital banking, and SWIFT fees. So always compare the total ownership costs, not only interest rates, before opening the NRE accounts.
Mistake 6: Holding Joint Accounts with Indian Residents Improperly
NRIs can hold NRE or NRO accounts jointly with resident close relatives, but only on a “former or survivor” basis. The NRI must remain the primary holder, and residents cannot operate the account independently unless permitted. Incorrect joint structures can lead to account restrictions or FEMA non-compliance.
Mistake 7: Underestimating Hidden Fees
Usually, NRIs get affected by the attractive marketing phrases like free international banking, low minimum balance requirements, or competitive exchange rates, but the real costs appear in fine print. Many banks apply a 2-4% currency conversion markup disguised in today's rate and reduce the remittance value.
Incoming wire transfer can also attract the ₹750–₹1,500 fees per transaction, and add up quickly for anyone to whom you are sending money regularly. On top of that, missing minimum balance requirements results in monthly penalties of ₹600–₹1,000. When combined, the hidden charges can easily outweigh any advertised benefits and become essential for NRIs to determine the full cost structure before choosing a NRE account.
Mistake 8: Incomplete Documentation for Repatriation
Transferring money from an NRE account to a foreign account requires complete documentation. This is where an NRI can make mistakes by keeping. Incomplete documentation for repatriation. It leads to delays or rejections of your repatriation request.
Mistake 9: Delaying PAN Linking Where Required
The other NRE account mistakes can be made while opening an NRE account, such as a delay in updating and linking of PAN to their account. Banks require PAN updates for KYC verification, tax compliance, and high-value transactions. Any delays can result in frozen accounts, TDS mismatches, and rejected remittances. NRIs must update their PAN details with their banks earlier and avoid disruptions.
Mistake 10: Ignoring Account Conversion Upon Returning to India
Another NRI account mistake is forgetting the account conversion to a resident account when returning to India. Failing to do so can result in penalties, or the account is treated as non-compliant with the regulation. So be proactive and make the conversion as soon as you change your residency status.
Tax And Cross-Border Reporting Flags: FATCA, CRS, FBAR Basics
Compliance and cross-border reporting are important for NRIs to avoid financial and legal complications.
Under the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS), banks are required to collect and share the account details, like balances, interest earned, and other financial details, with tax authorities.
It ensures that the foreign and Indian accounts of NRI are transparent for taxation purposes.
If you fail to submit the accurate self-certification forms, including residency details or tax identification number, it results in blocked transactions, penalties, and frozen accounts.
For the US NRIs, the additional reporting is also important through FBAR (Foreign Bank Account Report) and Form 8938, which must declare foreign financial accounts exceeding specified thresholds.
Complete proper documentation timely manner, like account statements, remittance proofs, and FATCA/CRS declarations, and resolve issues quickly.
Conclusion
It is important for an NRI to open an NRE account, but small documentation and compliance errors can lead to delays and repatriation issues. By being aware of such NRE account mistakes like incomplete documentation, KYC, FATCA/CRS, and account selection, you can make onboarding easier and ensure that your account is fully compliant to operate.
Make sure to follow NRE account opening tips, treat your NRE account as part of the cross-border financial system, keep proper records, and choose the bank with strong NRI support.
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FAQs
Can I deposit the Indian income in an NRE account?
No, you can not deposit Indian income in an NRE account. Indian source income, like rent, dividends, can also be deposited into an NRO account.
Is interest earned on an NRE account taxable?
NRE account interest is tax-free only as long as the account holder maintains NRI/PROI (Person Resident Outside India) status. Upon returning to India (“Resident” under FEMA), the interest is taxable unless RBI specifically permits continued NRE status.
Can I open an NRE account without visiting India?
Yes, you can open the NRE account without visiting India. It is possible because some banks provide you with remote onboarding via video KYC and e-documents, and notary attested documents.
What happens to the NRE account after I return to India?
After returning to India, you should re-designate your NRE account to a resident or RFC account.
