NRO Accounts and the USD 1 Million Cap: How NRIs Repatriate Rupee Income and Sale Proceeds Under FEMA
How NRIs repatriate NRO balances and sale proceeds under the RBI's USD 1 million per financial year cap: FEMA rules, India tax, the India-US DTAA, and the Form 15CA/15CB mechanics.
For a Non-Resident Indian, the Non-Resident Ordinary (NRO) account is where the rupee economy of a former resident keeps ticking: rent from a Pune flat, dividends from an old equity portfolio, the sale proceeds of inherited land in Lucknow. The single rule that governs how much of that money can leave India is the USD 1 million per financial year ceiling set by the Reserve Bank of India under the Foreign Exchange Management (Remittance of Assets) Regulations 2016, notified as FEMA Notification No. 13(R)/2016-RB on 1 April 2016 and consolidated in RBI Master Direction No. 13/2015-16.
This guide walks through where that USD 1 million cap comes from, how India taxes the income and gains parked in an NRO account before a rupee can be repatriated, how a country of residence such as the United States treats the same income under the India-US tax treaty that took effect on 12 September 1991, and the documentary mechanics that an authorised dealer (AD) bank insists on before wiring funds abroad.
FEMA / DTAA Position
The constitutional anchor for any cross-border movement of capital is Section 6 of the Foreign Exchange Management Act 1999. Capital account transactions are permitted only to the extent the RBI specifically allows them; in the words of the statutory brief, an NRI needs RBI permission unless a transaction is specifically permitted. The Remittance of Assets Regulations 2016 are precisely such a permission, and they fix the headline number: an AD bank may, on documentary evidence, allow an NRI or a Person of Indian Origin (PIO) to remit up to USD 1 million per financial year (the April-to-March year) out of the balances in an NRO account, the sale proceeds of assets, or assets acquired in India by way of inheritance or legacy.
Two conditions sit alongside that ceiling and are non-negotiable for the bank. First, the remittance is subject to payment of all applicable taxes in India. Second, the account holder must furnish an undertaking, supported by a chartered accountant's certificate, that taxes have been provided for. The RBI's Master Direction No. 13/2015-16 on Remittance of Assets sets out the full evidentiary trail.
It is worth contrasting the NRO route with the two fully repatriable accounts. Money in a Non-Resident External (NRE) account and a Foreign Currency Non-Resident (FCNR) deposit is repatriable without any USD 1 million limit, because those accounts hold funds the NRI brought in from abroad. The USD 1 million cap exists only because NRO money is, by definition, income or assets that arose inside India. See our glossary entries on the NRO account, the NRE account, and the FCNR deposit for the account-by-account distinction, and our earlier explainer on why NRE interest is income-tax exempt and fully repatriable.
A common confusion is between this Remittance of Assets window and the Liberalised Remittance Scheme. The LRS ceiling of USD 250,000 per financial year applies to resident individuals sending money out of India; it is not the route an NRI uses. NRIs draw on the separate USD 1 million Remittance of Assets facility, so the two limits should never be added together or confused.
Tax Treatment in India
Before the USD 1 million door opens, the Income-tax Act 1961 takes its share. The mechanism for a non-resident is withholding at source under Section 195, and the statutory rule is that tax is withheld at the rates in the Income-tax Act or the rates in the applicable tax treaty, whichever is lower. That single principle drives almost every NRO repatriation calculation.
The character of the NRO income decides the rate:
| Income credited to NRO | India tax character | Headline India rate |
|---|---|---|
| Interest on NRO deposits | Taxable in full | Max marginal rate via Section 195 (treaty may reduce) |
| Rent from Indian property | Taxable, after 30% standard deduction on net annual value | Slab rate, TDS under Section 195 |
| Listed equity LTCG (held >12 months) | Long-term capital gain | 12.5% above the Rs 1,25,000 annual exemption |
| Listed equity STCG (held <=12 months) | Short-term capital gain | 20% |
| Immovable property LTCG (acquired on/after 23 July 2024) | Long-term capital gain | 12.5% without indexation |
| Immovable property LTCG (acquired before 23 July 2024) | Long-term capital gain | 20% with indexation (grandfathered) |
The capital gains rates above follow the Budget 2024 regime that took effect on 23 July 2024. For property, the law preserves a choice for assets bought before that date: the seller may pay 12.5% without indexation or 20% with indexation, whichever is more favourable. Listed-equity long-term gains continue to enjoy the Rs 1,25,000 exemption per financial year before the 12.5% rate bites.
On top of the base rate, a non-resident pays surcharge and cess. Surcharge runs at 10% where total income exceeds Rs 50 lakh, 15% above Rs 1 crore, and 25% above Rs 2 crore; under the new regime the surcharge is capped at 25% even above Rs 5 crore. A health and education cess of 4% applies on the tax-plus-surcharge figure. You can model the effective outflow on our NRI income-tax calculator and the rental-income tax calculator.
For the sale of Indian property, Section 195 obliges the buyer to deduct TDS on the sale consideration, and the default deduction is computed on the gross sale value, not merely the gain. To avoid cash being trapped, the NRI seller should apply to the jurisdictional assessing officer for a lower or nil deduction certificate under Section 197 of the Income-tax Act 1961, so that withholding is restricted to the actual 12.5% (plus surcharge and cess) due on the gain. The Income Tax Department's portal at incometax.gov.in hosts the Form 13 application and the capital-gains provisions. The glossary entry on TDS explains the withholding mechanism in plain terms.
Tax Treatment Abroad
Having paid tax in India, the NRI must still report the same income at home, because most residence countries tax worldwide income. The relief from double taxation comes through the treaty's foreign-tax-credit article. Under Article 24 of the India-US Double Taxation Avoidance Agreement, a foreign tax credit is available in the country of residence, so a US-resident NRI offsets Indian tax paid against US tax on the same income, typically by filing IRS Form 1116.
The treaty also caps the Indian rate on several income streams, which is where the Section 195 "whichever is lower" rule does its work. The India-US DTAA, effective from 12 September 1991, sets out:
| Income type (India-US DTAA) | Treaty rate | Note |
|---|---|---|
| Interest (Article 11) | 15% | Lower than the domestic maximum marginal rate on NRO interest |
| Dividends (Article 10) | 25% portfolio | 15% only where the recipient holds at least 10% of the voting stock |
| Royalties and fees for technical services (Article 12) | 15% | Subject to the "make available" test |
| Long-term capital gains | 12.5% | India retains taxing rights; the gain is not exempt |
Two points deserve emphasis. First, capital gains are not exempt under the treaty. India retains the right to tax the gain at 12.5%, and the US then grants a credit; any NRI told that treaty capital gains are "exempt" is being misadvised. Second, to access the reduced treaty rates an NRI must furnish a Tax Residency Certificate (TRC) from the country of residence together with Form 10F filed electronically on the Indian tax portal. Without the TRC and Form 10F, the AD bank and the payer apply domestic rates. Model the credit interaction on our DTAA benefit calculator and read the DTAA glossary entry for the treaty framework. For the official treaty text and rates, the Income Tax Department maintains the DTAA library at incometax.gov.in.
Repatriation Mechanics
Once taxes are settled, the operational sequence is well defined. The remittance from an NRO account requires the account holder to submit two forms: Form 15CA, a self-declaration filed online, and Form 15CB, a certificate from a chartered accountant confirming that the appropriate tax has been deducted. The AD bank will not process the SWIFT transfer without both, and it will check the cumulative remittances against the USD 1 million per financial year ceiling.
It helps to separate two categories of NRO money, because they are treated differently for repatriation:
- Current income: rent, dividends, pension, and interest credited to the NRO account are freely repatriable, net of applicable taxes, and do not consume the USD 1 million limit. This reflects the RBI's treatment of post-tax current income as remittable.
- Capital and balances: the sale proceeds of property and shares, inherited assets, and accumulated NRO balances fall within the USD 1 million per financial year ceiling under the Remittance of Assets Regulations 2016.
A frequently used planning route is to move eligible NRO funds to an NRE account after taxes, because NRE balances are then fully and freely repatriable. The transfer is permitted up to the same USD 1 million per financial year limit and again requires Form 15CA and Form 15CB. You can plan the sequence with our NRO repatriation calculator. The RBI's Master Direction No. 13/2015-16 on Remittance of Assets, available at rbi.org.in, is the controlling reference for AD banks.
The practical lesson for any NRI is to sequence the transaction: compute and pay the India tax first, secure the Section 197 certificate where property is involved, obtain the TRC and file Form 10F to claim treaty relief, then file Forms 15CA and 15CB so the AD bank can release funds within the USD 1 million annual window.
FAQ
What is the USD 1 million NRO repatriation limit?
It is the maximum an NRI or PIO may remit abroad in a single financial year (April to March) out of NRO balances, sale proceeds of assets, or inherited assets, under the Foreign Exchange Management (Remittance of Assets) Regulations 2016 notified by the RBI on 1 April 2016. The AD bank applies the limit on documentary evidence and only after Indian taxes are paid.
Does the USD 1 million cap apply to NRE and FCNR accounts too?
No. NRE account balances and FCNR deposits are fully repatriable without any ceiling, because they hold funds remitted from abroad. The USD 1 million per financial year limit applies only to NRO money, which represents income or assets that arose within India.
Is rent or dividend income subject to the USD 1 million cap?
No. Current income such as rent, dividends, pension, and interest credited to an NRO account is freely repatriable on a net-of-tax basis and does not count against the USD 1 million ceiling. The cap targets capital items: sale proceeds, inherited assets, and accumulated balances.
Are capital gains exempt under the India-US tax treaty?
No. Under the India-US DTAA, effective from 12 September 1991, India retains the right to tax capital gains, and the long-term rate is 12.5%. The US then grants a foreign tax credit under Article 24. Treaty capital gains are never "exempt" in India.
What forms are needed to repatriate money from an NRO account?
The account holder files Form 15CA online as a self-declaration and obtains Form 15CB, a chartered accountant's certificate that tax has been deducted. Where property is sold, a lower or nil TDS certificate under Section 197 of the Income-tax Act 1961 is advisable to avoid withholding on the gross sale value.
How is TDS on NRO income decided?
Section 195 of the Income-tax Act 1961 requires withholding at the Income-tax Act rate or the applicable treaty rate, whichever is lower. For a US-resident NRI, interest is capped at 15% under Article 11 of the DTAA, provided a Tax Residency Certificate and Form 10F are furnished; otherwise the domestic rate applies.
Can I claim foreign tax credit in my country of residence?
Yes. Article 24 of the India-US DTAA allows a resident to credit Indian tax paid against home-country tax on the same income. A US-resident NRI typically claims this on IRS Form 1116, which prevents the same rupee income being taxed twice.
Sources & Citations
- Master Direction No. 13/2015-16 on Remittance of Assets — Reserve Bank of India
- International Taxation and DTAA library — Income Tax Department, Government of India
Frequently Asked Questions
What is the USD 1 million NRO repatriation limit?
It is the maximum an NRI or PIO may remit abroad in a single financial year (April to March) out of NRO balances, sale proceeds of assets, or inherited assets, under the Foreign Exchange Management (Remittance of Assets) Regulations 2016 notified by the RBI on 1 April 2016. The AD bank applies the limit on documentary evidence and only after Indian taxes are paid.
Does the USD 1 million cap apply to NRE and FCNR accounts too?
No. NRE account balances and FCNR deposits are fully repatriable without any ceiling, because they hold funds remitted from abroad. The USD 1 million per financial year limit applies only to NRO money, which represents income or assets that arose within India.
Is rent or dividend income subject to the USD 1 million cap?
No. Current income such as rent, dividends, pension, and interest credited to an NRO account is freely repatriable on a net-of-tax basis and does not count against the USD 1 million ceiling. The cap targets capital items: sale proceeds, inherited assets, and accumulated balances.
Are capital gains exempt under the India-US tax treaty?
No. Under the India-US DTAA, effective from 12 September 1991, India retains the right to tax capital gains, and the long-term rate is 12.5%. The US then grants a foreign tax credit under Article 24. Treaty capital gains are never exempt in India.
What forms are needed to repatriate money from an NRO account?
The account holder files Form 15CA online as a self-declaration and obtains Form 15CB, a chartered accountant's certificate that tax has been deducted. Where property is sold, a lower or nil TDS certificate under Section 197 of the Income-tax Act 1961 is advisable to avoid withholding on the gross sale value.
How is TDS on NRO income decided?
Section 195 of the Income-tax Act 1961 requires withholding at the Income-tax Act rate or the applicable treaty rate, whichever is lower. For a US-resident NRI, interest is capped at 15% under Article 11 of the DTAA, provided a Tax Residency Certificate and Form 10F are furnished; otherwise the domestic rate applies.
Can I claim foreign tax credit in my country of residence?
Yes. Article 24 of the India-US DTAA allows a resident to credit Indian tax paid against home-country tax on the same income. A US-resident NRI typically claims this on IRS Form 1116, which prevents the same rupee income being taxed twice.