The Indian Ocean plays a fundamental role in the basic physics of the monsoons and an understanding of the ocean's seasonal and interannual variability is essential for both diagnostic studies and prognostic forecasts. In response to the cycle of reversing winds and the radiative forcing at its surface, the Indian Ocean undergoes a cycle of variability which has been shown in numerous studies to feedback onto the state of the atmosphere. Using the 4 1/2 layer Indian Ocean basin model based on McCreary et al (1993) and developed by Han (1998), we explore the heat balance of the Northern Indian Ocean (NIO) and attempt to evaluate the role and method of interhemispheric heat transport on annual and interannual time scales. It has been reported that the seasonal cycle of Ekman transport from one hemisphere into the other regulates the thermal structure and the sea surface temperature (SST) in the Indian Ocean Loschnigg and Webster (2000). We examine this mechanism as the method of heat exchange between the hemispheres, specifically Miyama et al ’s (2002) arguments for continuity of Ekman transport at the Equator. A scheme for a new heat budget is developed for the Northern Indian Ocean, and used to investigate the relationships between meridonal heat transport into and out of the NIO and its temperature structure, on intrannual and interannual time scales. A correlation of -0.011 is found between the annual cycle of heat flow into the Northern Indian Ocean via meridional heat transport, and the change in energy associated with an increase in temperature. This lack of correlation is further explored as the two series are shown to be spectrally orthogonal. Next this relationship is explored on interannual scales and a correlation of -0.151 is found between these budget terms for the period 1980-1999. This extremely weak relationship of the wrong sign appears to cast doubt on the claim that oceanic heat transport (by any mechanism) regulates the temperature structure of the NIO. The budgets reveal that variations in the thickness of the mixed layer appear to drive the cycle of temperature change on both intranual and interannual time scales. The extensive nature of heat transport is also addressed with the new budget and questions are raised about its usefulness as an index for SST variability on any timescale.