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I want to transfer some money from USA checking account to my Indian NRE account to get the benefit of a good interest rate. But when I need this money back in USA, can I transfer money from my NRE account to my USA checking account?

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Assuming that the NRE (NonResident External) account is in good standing, that is, you are still eligible to have an NRE account because your status as a NonResident of India has not changed in the interim, you can transfer money back from your NRE account to your US accounts without any problems. But be aware that you bear the risk of getting back a much smaller amount than you invested in the NRE account because of devaluation of the Indian Rupee (INR). NRE accounts are held in INR, and whatever amounts (in INR) that you choose to withdraw will be converted to US$ at the exchange rate then applicable. Depending on whether it is the Indian bank that is doing the conversion and sending money by wire to your US bank, or you are depositing a cheque in INR in your US bank, you may be charged miscellaneous service fees also.

To answer a question that you have not asked as yet, there is no US tax on the transfer of the money. The interest paid on your deposits into the NRE account are not taxable income to you in India, but are taxable income to you in the US, and so I hope that you have been declaring this income each year on Schedule B of your income tax return, and also reporting that you have accounts held abroad, as required by US law. See for example, this question and its answer and also this question and its answer.

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  • Thanks a bunch for Dilip for accurate answer. (1) However I am not able understand "devaluation of the Indian Rupee (INR)", Is it because bank would give me lower rate? (2) Any rought idea, how much could be the misc charges? (3) Which bank is good for NRO, NRE and FCNR a/c? (4) Can I transfer money withing my own NRO, NRE and FCNR a/c? (eg. FCNR <--to/from--> NRE , NRE <--to/from--> NRO ) Please help me understand.
    – Pratik
    Commented Apr 13, 2014 at 19:28
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    @Pratik If you sent US$1000 to your NRE account when the exchange rate was INR 50 = US $1 (pre 2011), your deposit is INR 50,000. In one year, it earns 8%, say, so you have INR 54,000. Hopefully you declare that interest earned on your Form 1040 Schedule B and pay taxes on that. You now close the account and get all your money back in US $. But the exchange rate is INR 60 = US $1 (2013) on the day you convert, and so you get only US $900 back to deposit into your US checking account. So you earned 8% interest on your deposit, much more than you could have gotten from your US checking account.
    – Dilip Sarwate
    Commented Apr 13, 2014 at 19:54
  • Ah.. got it.. How about (3) Which bank is good for NRO, NRE and FCNR a/c? (4) Can I transfer money withing my own NRO, NRE and FCNR a/c? (eg. FCNR <--to/from--> NRE , NRE <--to/from--> NRO ) Please help me understand
    – Pratik
    Commented Apr 14, 2014 at 2:26
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    Hey @DilipSarwate ! Thanks. A follow up question about the previous example. When I got the money back, it was $900. Would it be considered as a loss, and can I get the tax back of that 8% I already paid last year ? How would that work out ?
    – Jay Patel - PayPal
    Commented Mar 19, 2015 at 20:08

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