NRO Account for Non-Residents: Who Can Open It and the USD 1 Million Repatriation Cap

A Non-Resident Ordinary (NRO) account is where the rupee earnings that follow you after you leave India come to rest — the rent from a Bengaluru flat, a dividend from an Indian company, a maturing fixed deposit, a pension. It is also the account non-residents understand least, because two questions collide inside it: who is legally allowed to open one, and how much of the money sitting in it can actually leave the country. The Reserve Bank of India answers the first through the Foreign Exchange Management Act, 1999 (FEMA); it answers the second with a single hard number — USD 1 million per financial year. This guide walks through both, with the tax that attaches at each step.

FEMA / DTAA Position

Under Section 2(w) of FEMA, 1999, a "person resident outside India" is any person who is not resident in India, and it is this class of person the RBI permits to hold an NRO account. The RBI Master Direction on Deposits and Accounts allows any such person to open an NRO account for bona fide rupee-denominated transactions — income that arises or accrues in India. That framing matters: the NRO account is not a vehicle for moving fresh foreign currency into India (that is what the NRE and FCNR accounts do), but a holding account for Indian-source rupee income after your residential status changes.

The account can be a savings, current, recurring or fixed-deposit account, and under the same Master Direction it may be held jointly. An NRO account may be held jointly with a resident relative on a "former or survivor" basis — the resident can operate it only after the non-resident account holder ceases to survive, a design that keeps operational control with the non-resident while allowing a resident to inherit access. Two non-residents may also hold an NRO account jointly.

The FEMA position on taking money out is deliberately narrower than the position on putting money in. Repatriation of balances from an NRO account is governed by the Foreign Exchange Management (Remittance of Assets) Regulations, 2016, which cap remittances at USD 1 million per financial year (the Indian financial year running 1 April to 31 March) across all of an individual's NRO accounts taken together. This is not a per-account or per-transaction ceiling — it is an aggregate annual limit on the person.

The Double Taxation Avoidance Agreement (DTAA) enters the picture only on the tax side, not the exchange-control side. FEMA decides whether the money can move; the treaty decides at what rate the income inside the account is taxed. On one point the treaties are consistent and worth stating plainly: capital gains on the sale of shares in an Indian company are not exempt for a non-resident. India retains its taxing right, and the long-term capital gains rate under the current treaty schedule sits at 12.5%. Reading a DTAA to mean "capital gains are exempt" is the single most expensive misreading a non-resident makes.

Tax Treatment in India

Income credited to an NRO account is taxed in India as the income of a non-resident. Interest earned on the NRO balance itself is fully taxable — unlike NRE and FCNR interest, which is exempt — and it is subject to tax deduction at source. Under Section 195 of the Income-tax Act, 1961, the payer deducts tax on NRO interest at 30%, to which the applicable surcharge and a 4% health and education cess are added. The TDS is deducted before the interest ever reaches you, which is why the effective bite on NRO interest is far heavier than the 10% a resident sees on ordinary bank deposits.

Surcharge stacks on top of the base 30% once total income crosses defined thresholds. The rates are worth setting out because non-residents with substantial Indian rental or investment income routinely cross them:

Note the ceiling in the last row. The new tax regime caps the highest surcharge at 25%; there is no higher band above that. A 4% health and education cess then applies on the sum of tax and surcharge in every case.

Section 195 does not lock you into the 30% domestic rate. It requires the payer to withhold at the rate in force in the Income-tax Act or the rate under the applicable DTAA, whichever is lower. That is the mechanism by which a non-resident in a treaty country brings the withholding down — but only if the treaty paperwork is in place before the interest is credited. To claim the lower treaty rate on NRO interest you need a valid Tax Residency Certificate (TRC) from your country of residence and a self-declaration in Form 10F, filed under Section 90. Without them, the bank withholds at the full domestic rate and you are left claiming a refund.

The treaty interest ceilings differ by country. The table below shows the withholding rate that a correctly documented non-resident can apply to NRO interest under three of the most common treaties:

A UAE-resident non-resident with a TRC therefore caps NRO interest withholding at 12.5% against the 30% domestic rate — but the reduction is not automatic and vanishes the moment Form 10F or the TRC is missing. You can model the domestic-versus-treaty outcome on your own numbers with the NRI tax calculator, and if the NRO income is rent from Indian property, the NRI rental income tax calculator works through the standard 30% deduction and the TDS the tenant must deduct.

Filing an Indian return remains worthwhile even when TDS has been deducted, because the 30% withholding is frequently higher than the tax actually due once the treaty rate, the basic exemption and any refund of excess deduction are factored in. The DTAA framework only delivers its benefit through the return; the withholding is an advance, not a final settlement.

Tax Treatment Abroad

Whether the same NRO income is taxed a second time depends entirely on the tax system of your country of residence, and the DTAA exists to stop the double charge from becoming a genuine double cost.

For a US-resident non-resident, the answer is that NRO interest is fully reportable to the Internal Revenue Service, because the United States taxes its residents and citizens on worldwide income. The India-US treaty, in force since 12 September 1991, resolves the overlap through its foreign-tax-credit article: tax paid in India on the interest is credited against the US liability on the same income, so the resident effectively pays the higher of the two rates rather than the sum. Portfolio dividends from Indian companies sit at a 25% treaty rate for US residents, and only fall to 15% where the recipient holds at least 10% of the voting stock of the paying company — a distinction under Article 10 that trips up many non-residents who assume a single dividend rate.

For a UK-resident non-resident, NRO income is likewise within the scope of UK worldwide taxation, and the India-UK treaty in force from 26 October 1993 provides the credit mechanism. The UK also operates a tie-breaker rule under Article 4 of the treaty for individuals who are technically resident in both countries in the same year — relevant in the year you move, when Indian and UK residence tests can both be satisfied.

The UAE is the instructive contrast. Because the Emirates levies no personal income tax on individuals, a UAE-resident non-resident faces no second layer of tax on NRO interest at all — the DTAA's lower 12.5% withholding rate is therefore the whole of the tax, not merely a credit against a larger foreign bill. To use it, though, the treaty requires a TRC supported by proof of a UAE establishment; a UAE residence visa alone does not satisfy the certification the Indian payer needs to apply the reduced rate.

The common thread across all three is that the foreign-tax credit is claimed abroad, on the foreign return, using evidence of the Indian tax deducted. Keep the Indian TDS certificates (Form 16A) and the tax-paid challans, because the credit in your country of residence is only as good as the documentation of what India has already taken.

Repatriation Mechanics

This is where the USD 1 million cap becomes a practical workflow rather than a statute. Remitting money out of an NRO account is not a matter of a single form; it is a sequenced process governed by both FEMA and the Income-tax Act.

The core rule, from the Remittance of Assets Regulations, 2016, is that up to USD 1 million per financial year may be remitted out of NRO balances, and that limit is aggregate across every NRO account you hold. Current-year income — such as rent or interest earned in the year — is generally freely repatriable through the normal banking channel after tax, while the USD 1 million window is what accommodates the drawing down of accumulated past balances and the proceeds of assets such as sold property or inherited funds.

Before the bank releases the funds it needs tax certification. The remitter files Form 15CA (a self-declaration of the remittance and the tax position), and for most taxable remittances a chartered accountant's certificate in Form 15CB confirming that the appropriate tax has been deducted or paid. Only once these are lodged will the authorised dealer bank process the outward remittance against the USD 1 million allowance. You can size a planned transfer, and see where it lands against the annual ceiling, with the NRI repatriation calculator.

It helps to see the three non-resident accounts side by side, because repatriability and taxability move together:

The NRE account and the FCNR deposit are the fully repatriable siblings; the NRO account is the one where the USD 1 million ceiling and the domestic tax bite both apply. A frequently used route is to remit taxed NRO funds, within the USD 1 million limit, into an NRE account or abroad — turning restricted rupee balances into freely repatriable funds once the tax has been settled and the 15CA/15CB certification obtained.

One structural point closes the loop with the FEMA section above: because the USD 1 million limit resets each financial year on 1 April, a non-resident who needs to move a large accumulated balance — the proceeds of an inherited property, say — can plan the remittance across two financial years to move up to USD 2 million without seeking special RBI approval, provided the tax on each tranche is certified. The cap is annual, not lifetime.

FAQ

Who is eligible to open an NRO account?

Any person resident outside India, as defined in Section 2(w) of FEMA, 1999 — which covers Non-Resident Indians and Persons of Indian Origin alike — may open an NRO account under the RBI Master Direction on Deposits and Accounts, for the purpose of routing bona fide rupee income arising in India.

Can an NRO account be held jointly with a resident?

Yes. Under the RBI Master Direction, an NRO account may be held jointly with a resident relative on a "former or survivor" basis, meaning the resident can operate the account only after the non-resident holder ceases to survive. Two non-residents may also hold an NRO account jointly.

What is the annual limit on repatriating money from an NRO account?

USD 1 million per financial year, under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. The limit is aggregate across all your NRO accounts and resets each year on 1 April, so it is possible to move up to USD 2 million across two financial years with the tax on each tranche certified.

At what rate is NRO interest taxed in India?

Interest on an NRO account is fully taxable and subject to TDS at 30% under Section 195 of the Income-tax Act, 1961, plus applicable surcharge and a 4% health and education cess. A lower DTAA rate — for example 15% for US and UK residents, or 12.5% for UAE residents — applies only if you furnish a valid TRC and Form 10F under Section 90 before the interest is credited.

Will I be taxed again in my country of residence?

If your country taxes worldwide income (as the US and UK do), the NRO income is reportable there, but the DTAA lets you credit the Indian tax already paid against the foreign liability, so you effectively pay the higher of the two rates rather than both. In a no-personal-income-tax jurisdiction such as the UAE, the reduced 12.5% Indian withholding is the entire tax on the interest.

What paperwork do I need to remit funds abroad from an NRO account?

Form 15CA (a self-declaration) and, for most taxable remittances, a chartered accountant's certificate in Form 15CB confirming the tax position. The authorised dealer bank processes the outward remittance against the USD 1 million annual allowance only once these are lodged.

Are capital gains on Indian shares exempt for a non-resident under a DTAA?

No. India retains its right to tax capital gains on shares of an Indian company, and long-term gains are charged at 12.5% under the current treaty schedule. Reading any DTAA as making such gains "exempt" is incorrect and can leave a large liability unpaid.