Repatriating Money From India: The USD 1 Million a Year FEMA Route for NRIs and PIOs

When a non-resident Indian sells a Mumbai flat inherited from a parent, closes a fixed deposit built from years of rupee earnings, or receives a legacy under a will, the money sits in India in rupees. Moving it abroad is not a bank transfer of convenience; it is a regulated act governed by the Foreign Exchange Management Act, 1999 (FEMA) and administered through Authorised Dealer (AD) banks. The headline number every NRI and Person of Indian Origin (PIO) should commit to memory is USD one million per financial year — the ceiling the Reserve Bank of India permits an AD bank to remit out of an NRO account, out of sale proceeds of assets, and out of assets acquired in India by inheritance or legacy, on documentary evidence and after Indian taxes are paid.

This guide sets out the FEMA route in full: what the statute allows, how India taxes the underlying gain before the money leaves, how the country of residence treats the remittance, and the precise account mechanics that turn a rupee balance into a dollar credit abroad.

FEMA / DTAA Position

The governing instrument is the RBI Master Direction on Remittance of Assets, read with the Foreign Exchange Management (Remittance of Assets) Regulations. Under this framework an AD bank may allow an NRI or a PIO to remit up to USD one million per financial year — the financial year running 1 April to 31 March — out of balances held in an NRO account, out of sale proceeds of assets, or out of assets in India acquired by way of inheritance or legacy. The USD one million limit is a per-person, per-financial-year aggregate: it covers both current-year sale proceeds and older accumulated NRO balances, and it includes transfers made to the individual's own NRE account or to a Special Non-Resident Rupee (SNRR) account, not only remittances sent overseas.

FEMA itself frames the entire regime. Section 6 of FEMA, 1999 governs capital-account transactions and requires RBI permission unless a transaction is specifically permitted; the Remittance of Assets regulations are that specific permission. Section 3 of the Act restricts unauthorised dealings in foreign exchange, which is why the remittance must pass through an AD bank rather than any informal channel. The one-million-dollar facility is the mechanism that keeps a legitimate capital-account outflow — the export of a non-resident's own Indian assets — inside the law.

Two points routinely trip up remitters. First, the USD one million ceiling is distinct from the USD 250,000 Liberalised Remittance Scheme (LRS) limit — LRS applies to resident individuals, not to NRIs remitting from NRO balances, so the two schemes do not overlap for a genuine non-resident. Second, the Double Taxation Avoidance Agreement (DTAA) does not create the right to remit; FEMA does. The DTAA governs how much tax each country may charge on the income, not whether the capital may cross the border. The RBI's Remittance of Assets Master Direction (rbi.org.in) is the operative source for the outflow; the treaty only allocates the tax.

Tax Treatment in India

The RBI facility is conditional: every remittance is "subject to payment of applicable taxes in India." The money cannot leave until the Indian tax on the underlying transaction has been discharged, and the AD bank will not process the remittance without proof of tax compliance.

Where the source of the funds is a sale of Indian property or securities, the gain is taxed as capital gains. For a long-term capital asset acquired on or after 23 July 2024, long-term capital gains are taxed at 12.5% without indexation (Budget 2024). For land or buildings acquired before 23 July 2024, the taxpayer may instead compute the gain at 20% with indexation under the grandfathering option, and pay whichever produces the lower liability. Listed-equity LTCG is taxed at 12.5% above the annual exemption of Rs 1,25,000, while short-term gains on listed equity are taxed at 20%. Where property is inherited, the cost and holding period of the previous owner carry over, so an inherited flat sold decades after the ancestor bought it is almost always a long-term asset.

On top of the base rate sit surcharge and cess. The health and education cess is 4% of tax plus surcharge. Surcharge applies by total-income band: 10% between Rs 50 lakh and Rs 1 crore, 15% between Rs 1 crore and Rs 2 crore, and 25% above Rs 2 crore. Critically, the surcharge on capital gains is capped at 15% regardless of income, and the maximum surcharge in the new tax regime is 25% — the old 37% top rate does not apply under the default regime.

Because the seller is a non-resident, tax is collected up front through withholding under Section 195 of the Income-tax Act, 1961. Section 195 requires the buyer to deduct tax at source (TDS) on the sum paid to a non-resident; the rate is the DTAA rate or the IT Act rate, whichever is lower. On property, TDS is deducted on the sale consideration, and an NRI seller who expects a lower actual gain than the gross deduction can apply to the Assessing Officer under Section 197 for a lower or nil deduction certificate. Any excess deducted is recovered by filing a return and claiming a refund — a routine step given how often TDS on gross proceeds exceeds the tax on the net gain. Understand the mechanics of TDS before you sign a sale deed, and model the net proceeds with the Oquilia NRI income-tax calculator and, for a let-out inherited flat, the rental-income tax calculator.

The statutory basis for the withholding and the capital-gains computation sits in the Income-tax Act, 1961, whose bare text is published on incometax.gov.in. Inheritance itself is not taxed in India — there has been no estate duty since 1985 — so receiving the asset triggers no tax. The tax arises only when the inherited asset is later sold and a capital gain crystallises. A remitter may also reduce the gain by reinvesting: Section 54 of the Income-tax Act exempts LTCG on a residential house if the proceeds are reinvested in another residential house within the prescribed timelines, though electing that route defers the very repatriation the exercise is meant to achieve.

Tax Treatment Abroad

Paying tax in India does not close the account. The country of residence generally taxes its residents on worldwide income, so the same capital gain or interest can be taxable again abroad — and the DTAA exists to prevent that second bite from being a full double charge. The mechanism is the foreign tax credit (FTC): the resident country credits the Indian tax already paid against its own liability on the same income.

For a US-resident NRI, Article 24 of the India-US treaty (effective 12 September 1991) provides a foreign tax credit in the country of residence, so Indian tax on the gain is creditable against US tax on the same gain. The treaty caps India's rate on several income streams — interest at 15%, portfolio dividends at 25% (falling to 15% only where the recipient holds at least 10% of the voting stock under Article 10) — but on capital gains India retains the right to tax under domestic law. The DTAA does not make capital gains exempt: India taxes the LTCG at 12.5%, and the resident country then gives credit for that Indian tax rather than waiving its own.

The UAE case is instructive: with no personal income tax in the UAE, there is no second charge to relieve, so the Indian tax is effectively the final tax — but the India-UAE treaty still confirms that capital gains on shares of an Indian company remain taxable in India, and a Tax Residency Certificate (TRC) with UAE-establishment proof is needed to claim treaty benefits. In every case the practical sequence is the same: pay or suffer the Indian tax, obtain Form 16A / the TDS certificate and Form 26AS confirmation, then claim the FTC in the residence-country return. Keep the Indian challan and the sale documents; residence-country tax authorities require evidence of foreign tax paid before allowing the credit.

Repatriation Mechanics

The account architecture decides how freely money moves. Three account types matter, and the difference between them is the whole game.

• NRE (Non-Resident External) account holds foreign earnings converted to rupees. It is freely and fully repatriable — both principal and interest — and the interest is exempt from Indian income tax. Money already in an NRE account is not constrained by the USD one million ceiling because it never needed the Remittance of Assets facility.
• NRO (Non-Resident Ordinary) account holds India-sourced income: rent, dividends, pension, and sale proceeds of Indian assets, including inheritances. Balances are repatriable only up to the USD one million per financial year limit, and only after tax. Interest earned in an NRO account is taxable in India.
• FCNR(B) (Foreign Currency Non-Resident, Banks) deposit holds funds in foreign currency, shielding the holder from rupee depreciation, and is fully repatriable. An FCNR deposit is a term deposit, not a savings account.

The one-million-dollar route runs through the NRO account. The typical sequence is:

1. Credit the proceeds to the NRO account. Sale consideration for the inherited property, net of Section 195 TDS, lands in NRO.
2. Discharge the tax. File the return or obtain the lower-deduction certificate; ensure Form 26AS reflects the correct TDS.
3. Assemble the documentary evidence. The AD bank requires Form 15CA (a declaration by the remitter) and Form 15CB (a chartered accountant's certificate confirming the tax position), together with the will or succession documents for an inheritance, and the sale deed.
4. Instruct the AD bank. The bank remits abroad — or transfers to the NRE or SNRR account — up to the USD one million financial-year aggregate.

The USD one million cap resets each financial year on 1 April, so a large estate can be repatriated across successive years without breaching the limit. Model the sequence and the residual rupee balance with the Oquilia repatriation calculator before instructing the bank, and confirm the current documentary requirements against the RBI Master Direction on Remittance of Assets at rbi.org.in.

FAQ

What is the USD one million limit and does it reset every year?

It is the RBI-permitted ceiling on how much an AD bank may remit for an NRI or PIO out of NRO balances, sale proceeds, or inherited/legacy assets — USD one million per financial year, aggregating overseas remittances and transfers to NRE or SNRR accounts. The financial year runs 1 April to 31 March, and the ceiling resets on 1 April, so a larger estate can be moved across multiple years.

Do I pay Indian tax on money I inherited?

No tax arises on receiving the inheritance — India has had no estate duty since 1985. Tax arises only when you later sell the inherited asset and a capital gain crystallises. For property or gold acquired by the previous owner before 23 July 2024, you may compute the LTCG at 20% with indexation or 12.5% without, whichever is lower; assets acquired on or after that date are taxed at 12.5% without indexation.

Is the USD one million limit the same as the LRS limit?

No. The USD 250,000 Liberalised Remittance Scheme applies to resident individuals. The USD one million Remittance of Assets facility applies to NRIs and PIOs moving money out of NRO balances and Indian assets. A genuine non-resident uses the one-million-dollar route, not LRS.

Will I be taxed again in my country of residence?

Possibly, if that country taxes worldwide income — but the DTAA gives a foreign tax credit for the Indian tax already paid. Under the India-US treaty, Article 24 allows the credit; capital gains are taxed by India at 12.5% and that Indian tax is credited against the US liability. In the UAE, with no personal income tax, the Indian tax is effectively final, though gains on Indian company shares remain taxable in India.

Are DTAA capital gains exempt?

No. India retains the right to tax capital gains under domestic law at 12.5% for long-term gains, and no treaty makes them exempt. The DTAA allocates taxing rights and provides a credit in the residence country; it does not zero out the Indian charge.

What documents does the bank need to remit from an NRO account?

For a remittance from NRO, the AD bank typically requires Form 15CA (remitter's declaration) and Form 15CB (a chartered accountant's certificate on the tax position), plus the underlying evidence — sale deed for property, and the will or succession certificate for an inheritance — and confirmation that applicable Indian taxes have been paid.

Can I move NRE money without touching the one-million-dollar limit?

Yes. NRE balances are fully and freely repatriable, principal and interest, and are not constrained by the USD one million ceiling, because that limit applies to the Remittance of Assets facility used for NRO balances and Indian-asset proceeds. FCNR(B) deposits are likewise fully repatriable.