NRE vs NRO Accounts: What Indians in Germany Must Declare for German Taxes
Most Indians in Germany don't know that NRE account interest, though tax-free in India, must be declared in Germany. Here's exactly what to declare and how.
One of the most common tax mistakes Indians in Germany make is assuming that NRE account interest is completely tax-free. It is tax-free in India — but Germany does not care about India's tax exemptions. If you are a German tax resident, Germany taxes your worldwide income, including your NRE interest. Here is exactly what you need to know and do.
NRE vs NRO: Quick Recap
If you have been living abroad for a while, you likely know the basics — but let us set the stage:
NRE (Non-Resident External) Account
- Funded with foreign earnings (your German salary transferred to India)
- Both principal and interest are freely repatriable
- Interest is completely tax-free in India under FEMA rules
- No TDS deducted by the bank
NRO (Non-Resident Ordinary) Account
- Funded with income earned in India (rent, pension, dividends)
- Repatriation subject to limits (up to USD 1 million per year)
- Interest is taxable in India — bank deducts TDS at 30% (or 10% with Form 15CA/CB under DTAA)
FCNR (Foreign Currency Non-Resident) Account
- Fixed deposits held in foreign currency (USD, GBP, EUR, etc.)
- Same tax treatment as NRE: tax-free in India, but taxable in Germany
The Key Fact: NRE Interest Is Not Tax-Free in Germany
This surprises most people. The reason is straightforward:
Germany taxes its tax residents on their worldwide income. The German Income Tax Act (EStG) does not make an exception for income that is tax-exempt in the source country. India's NRE exemption is a domestic Indian rule — it has no force in German tax law.
Failing to declare NRE/FCNR interest in Germany is not a grey area — it is tax evasion (Steuerhinterziehung), which carries penalties of up to 10 years imprisonment for large amounts and automatic interest charges of 1.8% per year on unpaid tax.
How to Declare NRE Interest in Germany
NRE interest is capital income (Kapitalerträge). In Germany, capital income is taxed via the flat rate Abgeltungsteuer:
- 25% flat tax
- Plus 5.5% solidarity surcharge on the tax (= 1.375% of income)
- Plus church tax if applicable
Where to declare it:
NRE interest goes in Anlage KAP (capital income from foreign sources), not Anlage AUS. The key fields:
- Line 15: Interest from foreign bank accounts
- Enter the gross EUR equivalent of total NRE/FCNR interest received
Exchange rate: Use the official Bundesbank annual average rate for the relevant year.
Is there a DTAA credit? No — because India levied no tax on NRE interest, there is nothing to credit. You pay the full German rate.
The annual Sparerpauschbetrag (saver's allowance) of €1,000 per person (€2,000 for couples) applies to all capital income including NRE interest. If your total capital income including NRE interest is under this threshold, no German tax is due.
NRO Interest: Different Treatment
NRO interest is taxed in India (TDS deducted) and also taxable in Germany. Here the DTAA kicks in:
- Your Indian bank deducts TDS — get Form 16A or check Form 26AS
- Declare the NRO interest in Anlage AUS (foreign income with treaty treatment)
- Claim the TDS paid as a DTAA credit
- Germany taxes the NRO interest at 25% but credits the Indian TDS
Net effect: If Indian TDS was 10% (using Form 15CA/CB), you pay an additional 15% to Germany. If TDS was 30% (without the treaty application), Germany credits only what they would have taxed — excess credit is not refunded.
FCNR Deposits: Same as NRE
FCNR deposits held in any foreign currency follow the same treatment as NRE:
- Tax-free in India
- Fully taxable in Germany
- No DTAA credit available
- Declare in Anlage KAP
The interest may be in USD or GBP — convert to EUR using Bundesbank annual average rates for the year the interest was credited.
What Documents You Need
Gather these before filing:
| Document | Source | What it shows | |----------|--------|---------------| | Account statement | Your Indian bank (online banking) | Interest credited per quarter/year | | TDS certificate (Form 16A) | Bank (for NRO accounts) | TDS deducted — needed for DTAA credit | | Form 26AS | TRACES website / AIS portal | Consolidated view of all TDS | | Annual interest certificate | Some banks issue this on request | Summarises full year interest |
Download your Form 26AS and Annual Information Statement (AIS) from the Income Tax India portal (incometax.gov.in) every year. These are the authoritative records the German tax office will accept as evidence.
Penalty Risk: The Numbers
Germany actively exchanges financial information with India under the Common Reporting Standard (CRS) / Automatic Exchange of Information (AEOI). This means:
- German authorities receive data about German residents' Indian bank accounts
- Non-declaration of NRE/NRO interest is increasingly likely to be detected
- A voluntary disclosure (Selbstanzeige) before being caught avoids criminal prosecution — but interest at 1.8% per year still applies
If you have not been declaring NRE/NRO interest in previous years, consider an amended return or voluntary disclosure. A Steuerberater can help structure this correctly.
How TaxDost Handles NRE/NRO Declaration
NRE and NRO interest require:
- Correct form selection (Anlage KAP vs Anlage AUS)
- Precise exchange rate conversion
- DTAA credit calculation for NRO (but not NRE)
- Aggregation across all accounts
TaxDost handles all of this automatically. You upload your bank statements or Form 26AS, we identify which accounts and interest amounts go where, and we generate the correct German tax form entries.
No manual conversion. No guessing which Anlage to use. No risk of missing income.
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