Repatriating NRO Funds Abroad: The USD 1 Million Per Year Route and the Tax Clearance NRIs Must Clear First

Every non-resident Indian who has built up rupee balances in India — rent, dividends, the sale proceeds of an inherited flat, a matured fixed deposit — eventually asks the same question: how much of this can I actually send abroad, and what must I settle with the tax department first? The Reserve Bank of India's answer is precise. Under the RBI FAQ "Accounts in India by Non-residents" (as on 16 January 2025), balances held in a Non-Resident Ordinary (NRO) account are remittable up to USD 1 (one) million per financial year (April to March), along with other eligible assets, and only after the authorised dealer bank satisfies itself that applicable income tax and other taxes in India have been paid. This article maps the full route: the FEMA gateway, the tax that must clear first, how your country of residence treats the remitted money, and the Form 15CA/15CB mechanics that move the funds.

Get any one of these wrong and a remittance can stall at the bank counter for weeks. The USD 1 million ceiling is not a tax exemption — it is a foreign-exchange facility under the Foreign Exchange Management Act, 1999, and the tax liability runs entirely in parallel. Below, each leg is unpacked against the governing statute or treaty so you can sequence the paperwork correctly the first time.

FEMA / DTAA Position

The legal backbone is Section 6 of the Foreign Exchange Management Act, 1999, which governs capital account transactions: a non-resident needs RBI permission for such transactions unless they are specifically permitted by regulation. Repatriation of NRO balances is one of those specifically permitted facilities. The RBI FAQ dated 16 January 2025 confirms that NRIs and Persons of Indian Origin (PIOs) may remit up to USD 1 million per financial year out of balances in NRO accounts, inclusive of sale proceeds of assets and the assets acquired in India by way of inheritance or legacy. The financial year for this purpose runs from 1 April to 31 March, and an unused portion does not carry forward to the next year.

This USD 1 million cap is distinct from, and should not be confused with, the Liberalised Remittance Scheme (LRS) limit of USD 250,000 per financial year, which applies to resident individuals (including NRIs who have returned to India and regained resident status) under Section 6 of FEMA. The two facilities serve different populations. A non-resident drawing down an NRO account uses the USD 1 million window; a resident sending money out uses the USD 250,000 LRS window. You can read the mechanics of the resident facility in our explainer on the USD 250,000 LRS window.

Where a Double Taxation Avoidance Agreement (DTAA) enters the picture is on the tax that must clear before the bank releases funds. A treaty does not give India or the foreign country a free pass on the money; it allocates taxing rights and caps withholding. Critically, on capital gains India retains its taxing right — gains on Indian assets are not "exempt" under any treaty. The India-United States DTAA (effective 12 September 1991) is illustrative: under it, long-term capital gains on Indian assets remain taxable in India at the domestic 12.5% rate, dividends are capped at 25% for portfolio shareholders (15% only where the recipient holds at least 10% of the voting stock, under Article 10), interest at 15%, and royalties and fees for technical services at 15%. Article 24 of that treaty then allows the United States to grant a foreign tax credit for tax paid in India, which is the mechanism that prevents the same income being taxed twice.

Tax Treatment in India

The tax that the authorised dealer bank must see settled before remitting NRO balances is governed by the Income-tax Act, 1961. The operative withholding provision for payments to non-residents is Section 195, under which tax is deducted at the rate prescribed in the Act or the applicable DTAA rate, whichever is lower (subject to the non-resident furnishing a valid Tax Residency Certificate and Form 10F). This "whichever is lower" rule is the practical heart of NRO repatriation tax planning — a treaty rate of 12.5% on capital gains beats an un-treatied domestic rate, but only if the documentation is in order.

The amounts that flow through an NRO account carry different tax character. Interest earned on the NRO balance itself is fully taxable in India and suffers TDS at 30% plus surcharge and the 4% health and education cess under Section 195. Rental income credited to the account is taxable on a net basis after the 30% standard deduction on annual value under Section 24(a); our NRI rental income tax calculator works the arithmetic end to end. Capital gains depend on the asset and holding period, summarised below.

Surcharge in the new tax regime is capped at 25% for total income above Rs 5 crore (the 37% slab applies only under the old regime), and the 4% cess applies on tax plus surcharge in every case. For a returning NRI who has regained resident status and files under the new regime for FY 2025-26, the Section 87A rebate is now Rs 60,000 for total income up to Rs 12,00,000 — but that rebate is irrelevant while you remain non-resident on India-source investment income. Run your own residency-sensitive numbers through the NRI tax calculator before initiating a remittance, because the TDS deducted at source is recoverable only by filing an ITR if it exceeds your final liability. For a refresher on the withholding mechanism itself, see our glossary entry on TDS.

Tax Treatment Abroad

Settling the Indian tax is only half the picture; the remitted money lands in a country that may tax it again. This is where the foreign-tax-credit machinery of the relevant DTAA matters. Under Article 24 of the India-US treaty (effective 12 September 1991), a US-resident NRI who has paid 12.5% capital-gains tax in India can claim a credit for that Indian tax against US federal tax on the same gain, so the effective combined burden is the higher of the two jurisdictions' rates rather than their sum. The credit is claimed in the United States through Form 1116, supported by the Indian TDS certificate (Form 16A) and the ITR acknowledgement.

The arithmetic is not symmetrical across income types. On NRO interest, India's domestic TDS of 30% plus cess is well above the 15% treaty cap in Article 11 of the India-US DTAA, so a US-resident NRI should furnish a Tax Residency Certificate and Form 10F to have Section 195 deduction restricted to the lower 15% — failing which the excess must be reclaimed by filing an Indian return. On dividends, the 25% portfolio cap under Article 10 will, for most US residents, be fully creditable against US tax. The principle to hold onto is that the DTAA never makes Indian-source capital gains tax-free abroad by making them exempt in India; India taxes them at 12.5%, and the residence country gives credit. For the underlying treaty concept, our DTAA glossary entry lays out how relief is computed under the credit and exemption methods.

Residents of treaty partners with different allocations — the United Kingdom, the United Arab Emirates, Canada, Singapore and Australia each have their own articles and rates — must read their specific treaty rather than generalise from the US position. What is constant across all of them is that India does not concede its capital-gains taxing right, and the foreign credit is the relief mechanism. NRIs holding Indian equities through the portfolio route should also review whether their holdings are on the repatriable or non-repatriable register, as covered in our piece on repatriable versus non-repatriable investing, because that classification, set at the time of purchase, determines whether sale proceeds can use the USD 1 million NRO route at all.

Repatriation Mechanics

The practical sequence at the bank is governed by the tax-compliance certification regime under Rule 37BB of the Income-tax Rules, which mandates Form 15CA and, in most cases, Form 15CB before a remittance leaves India. Form 15CA is a self-declaration filed by the remitter on the income-tax portal; Form 15CB is a certificate from a Chartered Accountant confirming the nature of the remittance and that the correct tax has been deducted. For NRO repatriation up to USD 1 million, the authorised dealer bank will not process the transfer without these forms, and our glossary entry on Form 15CA/15CB walks through which parts apply at which thresholds.

The account type you remit from changes everything. The table below distils the three principal non-resident accounts and their repatriation status under the RBI framework.

NRE and FCNR(B) balances are fully repatriable without the USD 1 million ceiling precisely because the funds originated abroad and have already crossed the foreign-exchange line; the RBI FAQ of 16 January 2025 confirms both principal and interest on NRE and FCNR(B) accounts are freely remittable. The USD 1 million cap bites only on NRO balances, which represent income earned within India. The cleanest planning move for many NRIs is therefore to route fresh India-source receipts correctly from the outset; our explainer on NRO, NRE and FCNR(B) account rules compares what each account permits. You can model a specific remittance against the cap using the repatriation calculator. For the underlying statutory framework, the glossary entry on FEMA sets out the capital versus current account distinction that decides whether a transaction needs RBI approval at all.

FAQ

Can I repatriate more than USD 1 million from my NRO account in a single year?

The RBI FAQ as on 16 January 2025 sets the NRO repatriation facility at USD 1 million per financial year for NRIs and PIOs. Amounts above this generally require a specific application to the Reserve Bank of India, and the limit does not carry forward — an unused balance in one financial year cannot be added to the next year's USD 1 million.

Do I pay tax again abroad on money I repatriate from my NRO account?

You may, but the DTAA's foreign-tax-credit mechanism prevents true double taxation. Under Article 24 of the India-US treaty (effective 12 September 1991), Indian tax already paid — for example 12.5% on long-term capital gains — is creditable against US tax on the same income via Form 1116, so the combined burden is the higher of the two rates, not the sum.

Are NRE and FCNR(B) balances subject to the USD 1 million cap?

No. Per the RBI FAQ of 16 January 2025, both principal and interest in NRE and FCNR(B) accounts are fully repatriable without any annual ceiling, because those funds originated as foreign earnings. The USD 1 million cap applies only to NRO balances, which hold India-source income.

Is Form 15CB from a Chartered Accountant always required?

Form 15CA is required for remittances under Rule 37BB of the Income-tax Rules, and Form 15CB (the CA certificate) is required in most cases where the remittance is taxable and exceeds the prescribed threshold. Authorised dealer banks will not release an NRO repatriation up to USD 1 million without the applicable parts of Form 15CA/15CB on record.

Are capital gains on my Indian shares exempt under the DTAA?

No. India retains the right to tax capital gains on Indian assets, and the long-term rate is 12.5% under Section 112A for listed equity. No DTAA treats these gains as exempt in India; relief abroad comes only through a foreign tax credit in your country of residence, not through exemption.

What TDS applies to the interest in my NRO account?

NRO interest is taxable in India and suffers TDS under Section 195 at 30% plus surcharge and 4% cess. A US-resident NRI furnishing a valid Tax Residency Certificate and Form 10F can have the deduction restricted to the 15% interest rate under Article 11 of the India-US DTAA, reclaiming any excess by filing an Indian return.

Which calculator helps me plan an NRO remittance?

Use the repatriation calculator to test a remittance against the USD 1 million cap, and the NRI tax calculator to estimate the Section 195 tax that must clear before the authorised dealer bank will release funds. Both reflect FY 2025-26 rates.