Rent, Dividends and Pension: The Current Income NRIs Can Repatriate Freely Beyond the Cap

Non-resident Indians frequently ask a version of the same question: "I earn rent from my Mumbai flat and dividends from my Indian shares, and I draw an Indian pension - how much of this can I actually send home, and what tax do I lose along the way?" The reassuring answer, rooted in the Reserve Bank of India's Master Direction on Deposits and Accounts, is that this stream of current income is freely repatriable net of applicable taxes, and it sits entirely outside the widely quoted USD 1 million ceiling. This guide sets out the FEMA position, the Indian tax that is withheld at source, how your country of residence taxes the same money, and the mechanics of moving it through your NRO, NRE and FCNR(B) accounts.

The distinction that governs everything below is the one FEMA draws between a capital account transaction and a current account transaction. Sale proceeds of a flat, an inheritance or the redemption of a mutual-fund corpus are capital; the rent that flat throws off, the dividend those units pay and the pension your former employer credits are current income. Get that classification right and the USD 1 million cap simply does not bind your recurring earnings.

FEMA / DTAA Position

The governing statute is the Foreign Exchange Management Act, 1999. Section 6 of FEMA treats capital account transactions as restricted unless specifically permitted - an NRI needs the enabling framework, not fresh RBI permission each time, to move capital abroad. It is under this capital-account head that the USD 1 million per financial year limit for remittances out of an NRO account (from sale of property, inheritance and other capital receipts) operates.

Current income is on a different footing altogether. Under the RBI Master Direction - Deposits and Accounts, current income such as rent, dividend, pension and interest is treated as freely repatriable, net of applicable taxes, over and above the USD 1 million capital-account limit, once the Authorised Dealer bank is satisfied that the credit genuinely represents the account holder's current income arising in India and that the tax on it has been paid or provided for. In practice this means your annual rent and dividend flows do not eat into the USD 1 million window you may separately need for a property sale.

The Double Taxation Avoidance Agreements (DTAAs) India has signed then decide how much tax India may levy before the money leaves. The three most common corridors for NRIs - the United States (treaty in force from 12 September 1991), the United Kingdom (26 October 1993) and the United Arab Emirates (22 September 1993) - each cap the Indian withholding on dividends and interest. One point deserves emphasis before we go further: for capital gains, none of these treaties makes the gain "exempt" in India. India retains the right to tax long-term capital gains on Indian assets, currently at 12.5% under the post-Budget-2024 regime. Treat any adviser who calls your Indian capital gain "treaty-exempt" with caution.

For US residents, the 15% dividend rate under Article 10 applies only where the recipient holds at least 10% of the voting stock (a parent-subsidiary relationship); ordinary portfolio shareholders fall into the 25% band. The India-UAE treaty additionally requires a valid Tax Residency Certificate supported by proof of a UAE establishment, and it confirms that capital gains on shares of an Indian company remain taxable in India. Read the DTAA glossary entry before you file, because the "make available" test in Article 12 of both the US and UK treaties changes whether technical-service fees are taxable at all.

Tax Treatment in India

Every rupee of the current income we are discussing is taxable in India first, because it arises here - a point rooted in the concept of income deemed to accrue in India, explained in our deemed income glossary entry. The mechanism that collects that tax before repatriation is Section 195 of the Income-tax Act, 1961, which requires the payer to withhold tax at either the rate in the Act or the applicable DTAA rate, whichever is lower. To claim the lower treaty rate you must furnish a Tax Residency Certificate and Form 10F; without them, the domestic rate applies.

Rental income is assessed under the head "income from house property". The tenant of an NRI landlord is the deducting party under Section 195 and must obtain a TAN, deduct tax before crediting rent, and deposit it against the landlord's PAN. Because the domestic withholding on an NRI's rent is steep, most landlords file a lower-deduction application so that TDS tracks their actual liability rather than a headline rate; you can model the net figure with our NRI rental income tax calculator. Our TDS glossary entry explains why the deducted amount is a credit, not a final cost - you reconcile it in your return.

Dividend income from Indian companies is fully taxable in the shareholder's hands since the abolition of the dividend distribution tax. For a non-resident, the company deducts tax under Section 195 at the treaty-capped rate shown above - 25% for a US portfolio investor, 15% for a UK resident and 10% for a UAE resident, in each case before the cash reaches your NRO account.

Pension paid from India is generally taxable in India and is repatriable as current income once tax has been provided for; the pension glossary entry sets out how commuted and uncommuted portions differ. Where a specific DTAA article assigns taxing rights on a private or government pension to one country, that article overrides the default - so confirm the position for your treaty rather than assuming.

On top of the base tax, high earners pay a surcharge, and everyone pays a 4% health and education cess on the tax-plus-surcharge figure. The surcharge slabs matter for NRIs with large Indian portfolios:

Note that the new tax regime caps the top surcharge at 25%; the 37% rate survives only in the old regime. One rebate NRIs cannot use is the Section 87A rebate (Rs 60,000 in the new regime for FY 2025-26) - it is available only to resident individuals, so non-residents compute tax from the first slab upward. Your residential status therefore drives the whole calculation; the day-count that determines it is the first thing to fix each year. You can estimate the aggregate liability using the NRI tax calculator and check the surcharge glossary entry for the marginal-relief mechanics.

Tax Treatment Abroad

Paying tax in India does not, by itself, discharge your obligation in your country of residence. The United States taxes its residents and citizens on worldwide income, and the United Kingdom taxes residents on their global income (subject to the remittance rules that applied to non-domiciled residents). The instrument that prevents the same rent or dividend being taxed twice is the foreign tax credit.

Under the India-US treaty, Article 24 provides for a credit in the country of residence for tax paid in the source country. So a US-resident NRI who suffers 25% Indian withholding on an Indian dividend generally claims that Indian tax as a credit against the US tax on the same dividend, capped at the US tax attributable to that foreign-source income. The India-UK treaty operates on the same relief principle, with its Article 4 tie-breaker resolving cases where an individual could be treated as resident in both countries in the same year.

The UAE corridor is structurally different because the UAE levies no personal income tax on individuals. For a genuine UAE-resident NRI, the Indian tax withheld is typically the only tax on the income, which is why the treaty's 10% dividend and 12.5% interest caps are so valuable - there is no second layer to credit them against. This is also why the tax authorities scrutinise UAE residency claims closely and insist on a Tax Residency Certificate backed by proof of a UAE establishment, effective under the treaty since 22 September 1993.

To convert Indian tax withheld into a foreign credit you will need the deduction documented. In India, the credit flows the other way for returning residents through Form 67; abroad, you rely on your Indian Form 16A / TDS certificate and Form 26AS. Model the interaction with our foreign tax credit calculator before you assume the credit fully wipes out the second-country tax - it rarely does where the residence-country rate exceeds the Indian rate.

Repatriation Mechanics

The account you route the money through decides how freely it moves. The three relevant accounts behave very differently:

Rent, dividends and pension almost always land in an NRO account, because they are Indian-source income and cannot be credited to an NRE account. The good news, per the RBI Master Direction, is that the current income portion of an NRO balance is freely repatriable once tax is paid or provided for - it does not consume your USD 1 million capital-account allowance. Our NRO account glossary entry and the repatriation calculator walk through the arithmetic of what leaves after TDS.

Operationally, a remittance from an NRO account above the threshold prescribed by the Income-tax Rules requires two forms: Form 15CA (a declaration by the remitter) and Form 15CB (a certificate from a chartered accountant confirming the tax position on the remittance). The Authorised Dealer bank will not process the transfer without them where they are required, because it is the bank that must be satisfied the tax has been paid or provided for. Keep the CA certificate, the TDS certificates and proof of the income's source ready; the bank's compliance check is precisely the "genuine current income" test the Master Direction describes.

If you would rather your funds carry no rupee-depreciation risk once repatriable, an FCNR(B) deposit holds the balance in the foreign currency itself - see the FCNR deposit glossary entry. Interest earned on NRE and FCNR(B) deposits is exempt from Indian income tax for a non-resident, whereas interest on an NRO deposit is fully taxable and subject to Section 195 withholding, which is the single biggest reason NRIs keep their genuinely foreign money out of NRO accounts.

FAQ

Does repatriating rent and dividends use up my USD 1 million limit?

No. Under the RBI Master Direction - Deposits and Accounts, current income such as rent, dividend, pension and interest is freely repatriable net of applicable taxes and sits over and above the USD 1 million per financial year limit, which applies to capital-account remittances such as sale proceeds and inheritance.

What tax rate does India withhold on my Indian dividends?

Under Section 195 of the Income-tax Act, 1961, tax is withheld at the DTAA rate or the Act's rate, whichever is lower. For dividends the treaty caps are 25% for a US portfolio shareholder, 15% for a UK resident and 10% for a UAE resident - but only if you furnish a Tax Residency Certificate and Form 10F.

Are my Indian capital gains exempt under the DTAA?

No. India retains the right to tax capital gains on Indian assets. Long-term capital gains are taxed at 12.5% under the post-Budget-2024 regime, and none of the US, UK or UAE treaties makes such gains "exempt" in India. The India-UAE treaty expressly confirms that gains on shares of an Indian company remain taxable in India.

Can I claim the Section 87A rebate as an NRI?

No. The Section 87A rebate, which is Rs 60,000 in the new tax regime for FY 2025-26, is available only to resident individuals. As a non-resident you compute tax from the first slab without it, which is why fixing your residential status correctly each year matters.

Which forms do I need to remit money from my NRO account?

Above the threshold in the Income-tax Rules you need Form 15CA (your declaration) and Form 15CB (a chartered accountant's certificate on the tax position). The Authorised Dealer bank uses these to satisfy itself that tax has been paid or provided for before releasing the funds.

Is interest on my NRE and FCNR deposits taxable in India?

No. Interest on NRE and FCNR(B) deposits is exempt from Indian income tax while you are a non-resident, and both principal and interest are fully repatriable. Interest on an NRO deposit, by contrast, is fully taxable and subject to Section 195 withholding.

How does my country of residence tax the same income?

Your residence country taxes worldwide income but gives a foreign tax credit for the Indian tax paid - Article 24 of the India-US treaty, for example, allows a credit in the US for Indian tax on the same income. The UAE levies no personal income tax, so for a genuine UAE resident the Indian withholding is usually the only tax, which is why the 10% dividend and 12.5% interest caps carry real value.