Property Proceeds, Students Abroad and Retiring Foreign Nationals: RBI NRI Remittance Facilities

When a non-resident Indian (NRI) sells a flat in Pune, funds a child's tuition in Toronto, or a retiring foreign national closes out an Indian posting, the money that leaves the country moves under a single rulebook: the Reserve Bank of India's Master Circular on Remittance Facilities for NRIs, Persons of Indian Origin (PIOs) and Foreign Nationals, issued under the Foreign Exchange Management Act, 1999 (FEMA), which came into force on 1 June 2000. Getting the sequence right matters, because the tax that India deducts at source and the credit the destination country allows are two different calculations that must be reconciled before a rupee becomes a dollar.

This guide walks through the three facilities the RBI groups together -- the USD 1 million window from an NRO account, the USD 100,000 maintenance line for students abroad, and the sale-proceed route for residential property -- and then the tax that sits on each, both in India and in the country of residence.

FEMA / DTAA Position

FEMA, 1999 draws a hard line between current-account transactions (broadly free) and capital-account transactions (restricted). Section 6 of the Act makes clear that a capital-account transaction needs RBI permission unless it is specifically permitted, and the remittance facilities below are precisely those permissions. For a resident Indian the comparable outbound route is the Liberalised Remittance Scheme, capped at USD 250,000 per financial year; a non-resident does not use the LRS at all and instead relies on the NRI-specific windows. The statutory text is on indiacode.nic.in.

The headline facility is the remittance of assets window: an NRI or PIO may remit up to USD 1 million per financial year out of balances held in a Non-Resident Ordinary (NRO) account, out of the sale proceeds of assets, and out of assets acquired by way of inheritance or legacy. The RBI's circular attaches no lock-in to this USD 1 million line, so the full amount can move in a single transfer or be split across the year (1 April to 31 March).

Families supporting a child overseas have a separate line. Under the maintenance and studies facility, a student studying abroad is treated for FEMA purposes in a way that lets close relatives send up to USD 100,000 towards maintenance and education. This sits alongside, not inside, the USD 1 million asset-remittance ceiling, so a household funding both a property settlement and a degree manages two distinct limits.

Residential property has its own carve-out. Sale proceeds of residential property are repatriable to the extent the purchase was originally paid for in foreign exchange (through NRE/FCNR funds or inward remittance), and this route is limited to two residential properties. Proceeds beyond that foreign-exchange component fall back into the USD 1 million NRO window rather than the property route.

One group faces a standing restriction. Citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan face restrictions on the remittance of residential-property sale proceeds and must route such requests to the RBI rather than to an authorised dealer bank. The restriction is nationality-based and applies regardless of how long the person has held the asset.

On the treaty side, relief from double taxation flows from Section 90 of the Income-tax Act, 1961, which gives a Double Taxation Avoidance Agreement (see our DTAA glossary entry) overriding force where it is more beneficial than domestic law. A critical warning for property sellers: no Indian DTAA treats capital gains on Indian immovable property as exempt. The India-United States treaty, effective from 12 September 1991, leaves each state free to tax gains under its own law, so India retains its taxing right and applies a long-term rate of 12.5 per cent.

Tax Treatment in India

Tax is collected before repatriation, not after. For payments to a non-resident, Section 195 of the Income-tax Act, 1961 requires the buyer or payer to withhold tax, and the RBI's section-195 position is that the deduction is made at the DTAA rate or the rate in the Income-tax Act, whichever is lower. For the mechanics of withholding, see the TDS glossary entry; the practical point is that the NRI seller receives the net amount and recovers any excess only by filing a return.

The rate on the gain depends on the holding period. Immovable property held for more than 24 months is a long-term capital asset under Section 2(42A) of the Act (incometax.gov.in), and for transfers on or after 23 July 2024 the long-term rate is 12.5 per cent without indexation. Property acquired before 23 July 2024 carries a grandfathered alternative of 20 per cent with indexation benefit; eligible sellers should model both and take the lower figure. Our indexation glossary entry explains how the inflation adjustment works, and the NRI capital gains calculator lets you compare the two bases side by side.

On top of the base rate, a surcharge applies by income band: 10 per cent for total income above Rs 50 lakh, 15 per cent above Rs 1 crore, and 25 per cent above Rs 2 crore, with the new regime capping the surcharge at 25 per cent rather than the old regime's 37 per cent. A health and education cess of 4 per cent then sits on the tax-plus-surcharge total. Our surcharge glossary entry sets out the bands; a high-value flat sale can push an otherwise modest earner into the 10 per cent or 15 per cent surcharge for that year alone.

Where the asset is not property but Indian securities, the India-US treaty sets its own ceilings. Dividends paid to a US-resident portfolio investor are taxable at 25 per cent under Article 10 (the 15 per cent rate applies only where the recipient holds at least 10 per cent of the voting stock), and interest is capped at 15 per cent under the treaty. Rental income from an Indian flat, meanwhile, is taxed at slab rates after the standard 30 per cent deduction and is a separate return item from the gain on sale -- the NRI rental income calculator handles that computation.

Tax Treatment Abroad

The same gain is visible to the country of residence, which is where the foreign tax credit prevents genuine double taxation. Under Article 24 of the India-US treaty, the United States allows its residents a credit for income tax paid to India, claimed on IRS Form 1116, so Indian tax withheld under Section 195 is not lost -- it is offset against the US liability on the same income. The treaty has applied since 12 September 1991, and the credit mechanism, not an exemption, is what keeps the gain from being taxed twice.

The credit also runs the other way for anyone claiming treaty relief on the Indian return. To obtain a foreign tax credit in India under Rule 128 of the Income-tax Rules, a taxpayer must file Form 67 before the return, documenting the foreign tax paid (incometax.gov.in). This matters for returning NRIs and for foreign nationals who become Indian tax residents and carry foreign-source income.

Timing is the quiet trap. India's tax year runs 1 April to 31 March, while the United States and many others use the calendar year, so a gain taxed in India in, say, the year ending 31 March 2026 may fall into a different foreign tax year. The foreign tax credit still applies, but the paperwork has to line the two periods up, and the credit is limited to the foreign tax attributable to the doubly-taxed income rather than the whole liability.

Repatriation Mechanics

The account the money sits in decides how freely it moves. The NRO account is the default landing spot for India-source income -- rent, dividends, pension, sale proceeds -- and it is from the NRO balance that the USD 1 million per financial year ceiling is measured. Every outward NRO remittance needs a Form 15CA self-declaration and, above the threshold, a Form 15CB certificate from a chartered accountant under Rule 37BB confirming that tax has been paid. See the NRO account glossary entry and use the NRI repatriation calculator to estimate the net transferable figure after tax.

The NRE account behaves very differently. Balances in a Non-Resident External account -- funded only from foreign earnings brought into India -- are fully and freely repatriable, both principal and the interest earned, with no USD 1 million cap, because the money arrived from abroad in the first place. This is why NRIs route genuinely foreign income into the NRE line rather than the NRO line; the NRE account glossary entry sets out the permitted credits.

The FCNR(B) deposit is the third pillar. A Foreign Currency Non-Resident (Bank) deposit holds the money in the foreign currency itself rather than in rupees, so it is fully repatriable and carries no rupee exchange-rate risk for the depositor while it runs (rbi.org.in). The FCNR deposit glossary entry explains how it differs from the NRE line, which is held in rupees.

Property proceeds follow the FEMA carve-out described above: repatriable to the extent paid in foreign exchange and limited to two residential properties, with any excess folded into the USD 1 million NRO window. Restricted-nationality holders -- citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan -- cannot use the automatic bank route for property proceeds and must seek RBI approval first.

FAQ

How much can an NRI repatriate from an NRO account each year?

Up to USD 1 million per financial year (1 April to 31 March), drawn from NRO balances, the sale proceeds of assets, and inherited or legacy assets, under the RBI Master Circular on Remittance Facilities. The facility has no lock-in, so the full USD 1 million can move in one transfer, provided Form 15CA and, where required, Form 15CB under Rule 37BB are filed.

Is the capital gain on selling my Indian flat exempt under the DTAA?

No. No Indian tax treaty exempts capital gains on Indian immovable property. The India-US treaty (effective 12 September 1991) lets India tax the gain under its own law, which means 12.5 per cent on a long-term gain for transfers on or after 23 July 2024, plus surcharge and 4 per cent cess. You then claim a foreign tax credit in your country of residence.

Can I send USD 100,000 to my child studying abroad?

Yes. The RBI's maintenance and studies facility allows close relatives to send up to USD 100,000 to a student abroad for maintenance and education. This is separate from the USD 1 million asset-remittance ceiling, so funding a child's degree does not reduce your property-proceeds headroom for the same financial year.

How many properties' sale proceeds can I repatriate?

The automatic property route is limited to two residential properties, and only to the extent the purchase was originally paid for in foreign exchange. Proceeds above that foreign-exchange component, or from a third property, fall back into the USD 1 million per financial year NRO window rather than the dedicated property route.

Do citizens of certain countries face extra restrictions?

Yes. Citizens of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Iran, Nepal and Bhutan face restrictions on remitting residential-property sale proceeds and must obtain RBI approval rather than using an authorised dealer bank directly. The restriction is based on nationality, not on how long the asset was held.

At what rate is tax deducted when I sell property as an NRI?

Under Section 195 of the Income-tax Act, 1961, the buyer withholds tax at the DTAA rate or the Income-tax Act rate, whichever is lower. For a long-term gain on property transferred on or after 23 July 2024 that base rate is 12.5 per cent, before the applicable surcharge (10, 15 or 25 per cent by income band) and 4 per cent cess. Any excess deducted is recovered by filing an Indian return.

Which account gives fully free repatriation without the USD 1 million cap?

Both the NRE account and the FCNR(B) deposit are fully repatriable with no annual ceiling, because they hold money that was earned or brought in from abroad. The USD 1 million per financial year cap applies only to the NRO account, which collects India-source income and sale proceeds.