Joint Holdings, Power of Attorney and Deposit Tenures: The RBI Rules Every NRI Account Holder Should Know

For the roughly 13.6 million Non-Resident Indians the Ministry of External Affairs counts across the Gulf, North America and the United Kingdom, the bank account is the single most important financial bridge home. Yet the rules that govern who may co-hold that account, who may operate it through a Power of Attorney, and how long a deposit can run are scattered across the Foreign Exchange Management Act, 1999 (FEMA) and a thicket of RBI Master Directions. The Reserve Bank of India's FAQ titled "Accounts in India by Non-residents", updated on 16 January 2025, restated several of these rules in plain terms. This guide reads them against the Income-tax Act, 1961 and the relevant Double Taxation Avoidance Agreements so that an NRI opening, sharing or renewing an account knows exactly where each rupee stands.

The stakes are practical. A joint-holding clause ticked wrongly can freeze an NRE balance when the resident co-holder tries to operate it. A deposit booked for the wrong tenure can lose its repatriability. And an NRO account quietly accruing interest at 30% Tax Deducted at Source can erode returns faster than most depositors expect. The numbers below come from FEMA, the RBI FAQ of 16 January 2025, the Income-tax Act and India's bilateral tax treaties — nothing here is estimated.

FEMA / DTAA Position

Section 6 of FEMA, 1999 is the gateway provision: a person resident outside India needs RBI permission for any capital-account transaction unless it is specifically permitted, and the Liberalised Remittance Scheme caps a resident individual's outward remittance at USD 250,000 per financial year. NRI bank accounts sit inside this framework as a "specifically permitted" class, which is why the RBI prescribes their exact features rather than leaving them to the banker's discretion.

On joint holding, the RBI FAQ of 16 January 2025 is explicit. An NRE (Non-Resident External) account may be held jointly by two or more NRIs or Persons of Indian Origin. It may also be held jointly with a resident relative — as defined under Section 2(77) of the Companies Act, 2013 — but only on a "former or survivor" basis. In that arrangement the resident relative can operate the account as a Power of Attorney holder during the lifetime of the NRI account holder, not as an equal joint signatory. An NRO (Non-Resident Ordinary) account, by contrast, may be held jointly with residents on an ordinary "either or survivor" basis, reflecting its character as a rupee account for India-sourced income.

The Power of Attorney itself is tightly bounded. Under the RBI rules the PoA holder, whether resident or non-resident, may make local rupee payments and may remit funds to the NRI account holder abroad, but may not gift the funds, may not repatriate outside India to a third party, and may not open or close the account. These limits flow from the FEMA principle in Section 6 that only specifically permitted capital movements are allowed; everything else needs prior approval.

Where the depositor is treated as resident of two countries, the relevant DTAA tie-breaker decides taxing rights. The India-UK treaty, effective from 26 October 1993, contains its residency tie-breaker in Article 4, and the India-USA treaty, effective from 12 September 1991, allocates a foreign tax credit under Article 24. None of these treaties treats Indian-source interest or capital gains as wholly exempt — a point Section 90 of the Income-tax Act reinforces by letting the assessee choose the treaty rate or the Act rate, whichever is more beneficial.

Tax Treatment in India

The Indian tax line between the two rupee accounts is sharp. Interest earned on an NRE savings or fixed deposit is exempt from Indian income tax under Section 10(4)(ii) of the Income-tax Act, 1961, provided the account holder qualifies as a person resident outside India under FEMA. Interest on an NRO account enjoys no such exemption: it is fully taxable and subject to Tax Deducted at Source under Section 195 at 30% plus the applicable surcharge and 4% health and education cess.

That headline 30% NRO rate is where a treaty earns its keep. Section 195 read with Section 90 allows TDS to be applied at the DTAA rate or the Act rate, whichever is lower, once the NRI furnishes a valid Tax Residency Certificate and Form 10F. The treaty interest rates differ by country, as the table below shows, and the gap against the domestic 30% is substantial.

Two cautions matter here. First, the surcharge that rides on top of the base tax is capped: in the new tax regime the maximum surcharge is 25%, not the 37% that once applied in the old regime above Rs 5 crore. Second, long-term capital gains on listed Indian equity are taxed at 12.5% under the post-Budget-2024 regime effective 23 July 2024, with an annual exemption of Rs 1.25 lakh — the treaty does not make these "exempt", and the UAE, UK and USA treaties all preserve India's right to tax gains on shares of an Indian company at that rate. An NRI selling property or shares should model the liability before remitting; our NRI tax calculator applies the correct slab, surcharge cap and cess in one pass.

For NRIs earning rent on Indian property, the tenant must deduct TDS under Section 195 on the gross rent before paying it into the NRO account, and the landlord then claims the standard 30% deduction under Section 24(a) at the time of filing. The rental income tax calculator walks through that deduction sequence. The key glossary references — FEMA, the NRE account and the NRO account — set out the statutory definitions in full.

Tax Treatment Abroad

A US-resident NRI is taxed by the Internal Revenue Service on worldwide income, so NRO interest taxed in India is also reportable in the United States. The India-USA DTAA resolves the overlap through Article 24, which grants a foreign tax credit in the country of residence for taxes paid in the source country. In practice the 15% Indian TDS on NRO interest becomes a credit against the US tax otherwise due on the same interest, eliminating most of the double charge. The treaty has been in force since 12 September 1991, and its dividend rules under Article 10 set 15% only where the recipient holds at least 10% of the voting stock — the portfolio rate for ordinary NRI shareholders is 25%.

NRE interest, being exempt in India under Section 10(4)(ii), carries no Indian tax to credit abroad, so a US or UK resident pays the full domestic rate on it with no offset. This is the quiet trap of treating NRE deposits as "tax-free": they are tax-free in India only, and the home-country revenue authority may still tax the interest in full. The India-UK treaty, in force since 26 October 1993, applies the same Article-24-style credit mechanism for its residents and uses the "make available" test in Article 12 for fees for technical services.

The UAE is the structural exception. With no personal income tax on individuals in the Emirates, a UAE-resident NRI faces no home-country charge on Indian-source income, which means the India-UAE DTAA rates — 12.5% on interest, 10% on portfolio dividends, in force since 22 September 1993 — operate as a final cost rather than a creditable prepayment. The treaty's own notes require a Tax Residency Certificate backed by proof of a UAE establishment before the lower rates apply, so a depositor who merely visits the Gulf cannot claim them.

Repatriation Mechanics

Repatriability is the feature that most sharply separates the three account types, and it is governed by FEMA rather than the Income-tax Act. Balances in an NRE account — both principal and the tax-exempt interest — are fully and freely repatriable to the account holder's country of residence without any monetary ceiling. FCNR(B) deposits, being held in foreign currency from the outset, are likewise fully repatriable along with the interest earned.

The NRO account is the constrained one. Current-income credits such as rent, dividends and pension are freely repatriable, but the broader balance — including the proceeds of selling inherited property — is repatriable only up to USD 1 million per financial year, and only after the NRI submits Form 15CA and a chartered accountant's Form 15CB certifying that the applicable taxes have been paid. This USD 1 million window resets each financial year on 1 April. Our repatriation calculator helps map a multi-year remittance plan against that annual cap.

Deposit tenure interacts directly with these rights, and the RBI sets the bands precisely. The table below consolidates the tenure rules confirmed in the RBI FAQ of 16 January 2025.

The one-year floor on FCNR(B) deposits is a FEMA condition, not a bank policy, which is why no bank offers a six-month FCNR(B). Breaking an FCNR(B) before the first year completes generally forfeits all interest. NRE term deposits running one to three years can be renewed on maturity while retaining their repatriable character, but if the account holder returns to India and becomes a resident, the deposit must be redesignated — an NRE account converts to a resident account or an RFC (Resident Foreign Currency) account, and continuing to operate it as NRE after losing non-resident status is a FEMA contravention.

A final mechanical point on status change: the moment an account holder's residential status flips, the bank must be informed "immediately" per the RBI rules. The PoA arrangement that let a resident relative operate the NRE account lapses the instant the principal becomes resident, because the account itself ceases to be an NRE account. Planning a return therefore means re-papering deposits, not just updating an address.

FAQ

Can a resident Indian be a joint holder in my NRE account?

Yes, but only on a "former or survivor" basis, per the RBI FAQ of 16 January 2025. The resident relative — as defined under Section 2(77) of the Companies Act, 2013 — cannot operate the account as an equal signatory during your lifetime; they may act only as a Power of Attorney holder for local payments and remittances to you. Full operating rights pass to them only as survivor, after your lifetime.

What is the maximum tenure for an FCNR(B) deposit?

An FCNR(B) deposit must run for not less than 1 year and not more than 5 years, a band fixed by FEMA and restated in the RBI FAQ of 16 January 2025. NRE fixed deposits, by contrast, run from 1 to 3 years. Breaking an FCNR(B) inside the first 12 months typically means no interest is paid.

How much can I repatriate from my NRO account each year?

Up to USD 1 million per financial year from the NRO account's eligible balance, after submitting Form 15CA and a chartered accountant's Form 15CB. Current income such as rent and dividends sits outside this cap and is freely repatriable. The USD 1 million ceiling resets every 1 April.

Is NRE interest really tax-free?

NRE interest is exempt from Indian income tax under Section 10(4)(ii) of the Income-tax Act, 1961, for as long as you remain a person resident outside India under FEMA. It is not necessarily tax-free in your country of residence — a US or UK resident may owe domestic tax on that interest with no Indian credit to offset it, because no Indian tax was charged.

What rate of TDS applies to my NRO interest?

The default is 30% plus surcharge and 4% cess under Section 195. By furnishing a valid Tax Residency Certificate and Form 10F you can apply the lower DTAA rate instead — 15% for US and UK residents, 12.5% for UAE residents — under Section 90, which lets you use the Act rate or the treaty rate, whichever is lower.

Can my Power of Attorney holder close my NRI account or gift the money?

No. Under the RBI rules the PoA holder may make local rupee payments and remit eligible funds to you abroad, but may not gift the funds, repatriate to a third party, or open or close the account. These restrictions follow from Section 6 of FEMA, 1999, under which only specifically permitted transactions are allowed.

Do I lose NRE benefits if I return to India for good?

Yes. Once you become a resident under FEMA, the account must be redesignated — typically to a resident account or an RFC account — and you must inform the bank immediately. The NRE tax exemption under Section 10(4)(ii) ends with your non-resident status, and any Power of Attorney operating the NRE account lapses because the account itself ceases to be NRE.