The one-million-dollar rule: how NRIs repatriate NRO balances and asset sale proceeds abroad under FEMA

Selling a Mumbai flat, closing a parent's fixed deposit or drawing down a rental corpus, and then moving that money to your account in New Jersey or Dubai, is one of the most common - and most misunderstood - transactions an Indian expatriate faces. The governing rule is deceptively simple: under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016, notified as FEMA 13(R)/2016-RB dated 1 April 2016, a Non-Resident Indian (NRI) or Person of Indian Origin (PIO) may remit up to USD 1 million per financial year (April to March) out of balances in a Non-Resident Ordinary (NRO) account and out of the sale proceeds of assets in India. Cross that ceiling and you need prior Reserve Bank of India approval. Everything else - the tax, the two forms and the banker's paperwork - hangs off that single number.

This guide walks through the FEMA position, the Indian tax that must be cleared before a rupee leaves the country, how your country of residence treats the same money, and the exact repatriation mechanics across NRO, NRE and FCNR(B) accounts. Every figure below is drawn from the RBI Remittance of Assets FAQ or from India's Income-tax Act, 1961.

FEMA / DTAA Position

The USD 1 million window is a capital-account facility, and its scope is wider than most people assume. Per the RBI FAQ on Remittance of Assets, the USD 1 million per financial year covers NRO account balances and the sale proceeds of assets in India, including immovable property, shares and assets acquired by way of inheritance or legacy. The limit is aggregate and per person: a couple who each hold NRO accounts have a combined USD 2 million a year, but a single individual cannot stack multiple accounts to exceed USD 1 million in the April-to-March year.

Critically, FEMA separates capital from current income. Current income - rent, dividend, pension and interest - is freely repatriable and does not consume any part of the USD 1 million cap, provided the funds sit in, or are routed through, an NRO account and the tax has been cleared. So an NRI drawing INR 6 lakh of annual rent can send that abroad in addition to a USD 1 million capital remittance in the same year. This distinction is the single most valuable planning lever, and it is worth confirming against the DTAA glossary entry before you file.

Breaching FEMA is not costless. Section 13 of the Foreign Exchange Management Act, 1999 exposes a contravener to a penalty of up to three times the sum involved, or INR 2 lakh where the amount is not quantifiable, plus INR 5,000 for every day a contravention continues. That is why authorised-dealer banks will not process an over-limit remittance without an RBI approval letter - the exposure sits partly with them.

On the treaty side, a Double Taxation Avoidance Agreement (DTAA) never overrides FEMA; the two operate in parallel. FEMA controls whether and how much you may send; the DTAA controls how much tax is charged on the underlying gain. A crucial correction to a widespread myth: no DTAA lets an NRI escape Indian tax on Indian capital gains entirely. India retains taxing rights on long-term capital gains at 12.5 per cent across the United States, United Kingdom and United Arab Emirates treaties alike, as the source country.

Tax Treatment in India

Before any repatriation, the Indian tax must be settled - this is the wall that Form 15CB certifies you have cleared. The tax depends on what the money represents.

For long-term capital gains on immovable property, the Budget 2024 regime (effective 23 July 2024) sets the rate at 12.5 per cent without indexation. Property acquired before 23 July 2024 is grandfathered: the seller may choose the older 20 per cent with indexation where that produces a lower liability. Short-term gains on property are taxed at the seller's slab rate. On listed equity, long-term gains above INR 1.25 lakh are taxed at 12.5 per cent and short-term gains at 20 per cent, both under the Budget 2024 framework.

On top of the base rate sit surcharge and cess. The surcharge slabs are set out below; note that for capital gains under Sections 111A, 112A and 112, the surcharge is capped at 15 per cent regardless of income size, and the enhanced 25 per cent rate applies only to other income in the new regime.

A 4 per cent health and education cess applies on tax plus surcharge in every case. So a long-term property gain for an NRI in the highest bracket carries an effective rate of 12.5 per cent x 1.15 surcharge x 1.04 cess, or roughly 14.95 per cent, not the headline 12.5 per cent.

The money is collected up front through TDS under Section 195. This is the trap that catches property buyers: when purchasing from an NRI, the buyer must deduct at the Section 195 rate on the capital gain - not the 1 per cent used for resident sellers under Section 194-IA. Section 195 sets withholding at the DTAA rate or the Income-tax Act rate, whichever is lower. On NRO interest, the domestic withholding rate is 30 per cent plus surcharge and cess, which the treaty can bring down materially. Because TDS is levied on the gross amount unless a certificate is obtained, NRIs routinely apply for a lower or nil deduction certificate under Section 197 to avoid locking up cash they will only recover on filing a return. Our NRI income-tax calculator models the surcharge and cess stack so you can size the deduction before completion.

Tax Treatment Abroad

Once India has taxed the gain, your country of residence usually taxes it again - and then gives credit for what India took. The mechanism is the foreign tax credit article of the relevant DTAA. The table below shows the residual Indian rates that flow into that credit calculation.

Under the India-USA treaty (effective 12 September 1991), Article 25 lets a US-resident NRI claim a credit against US tax for the Indian tax paid on the same income; the portfolio dividend rate is 25 per cent, dropping to 15 per cent only where the recipient holds at least 10 per cent of the voting stock under Article 10. A US person still reports the gain on their Form 1040 and offsets the Indian tax as a foreign tax credit, so double taxation is neutralised rather than avoided outright.

The India-UK treaty (effective 26 October 1993) works the same way, with interest capped at 15 per cent and a tie-breaker rule in Article 4 for anyone who is arguably resident in both countries in a transition year. The India-UAE treaty (effective 22 September 1993) is the most generous on passive income - portfolio dividends at 10 per cent and interest at 12.5 per cent - but the UAE levies no personal income tax, so a UAE-resident NRI generally cannot claim a foreign tax credit and simply bears the Indian tax as a final cost. Note that even the UAE treaty keeps capital gains on shares of an Indian company taxable in India.

To access any of these reduced rates, an NRI must, under Section 90(4) of the Income-tax Act, hold a valid Tax Residency Certificate from the country of residence and file Form 10F electronically on the Indian portal. To claim the credit on the Indian side of a return, Form 67 must be filed under Rule 128 before the return is processed. See the TRC glossary entry for the documentary standard authorised dealers expect.

Repatriation Mechanics

The account you hold determines how freely money moves, and the three NRI accounts behave very differently - a point covered in depth in our NRE vs NRO vs FCNR(B) comparison.

• An NRE account holds foreign earnings converted to rupees; both principal and interest are fully and freely repatriable, and the interest is exempt from Indian tax while you remain non-resident. It does not touch the USD 1 million cap.
• An FCNR(B) deposit holds funds in foreign currency (USD, GBP, EUR and others), carries no exchange risk on maturity, and is likewise fully repatriable outside the USD 1 million limit.
• An NRO account holds Indian-sourced income - rent, dividends, sale proceeds, legacy funds - and this is the account the USD 1 million rule governs. Interest earned in an NRO account is taxable in India.

Because property sale proceeds, inherited money and matured domestic deposits nearly always land first in an NRO account, the USD 1 million ceiling is, in practice, an NRO ceiling. The repatriation calculator helps you sequence multi-year transfers where a corpus exceeds USD 1 million in one go.

The outward transfer itself runs on a two-form drill administered by your authorised-dealer bank:

1. Form 15CB - a certificate from a Chartered Accountant stating the nature of the remittance, the applicable DTAA article and rate, and confirming that Indian tax has been deducted or paid. This is the TDS clearance the RBI FAQ refers to as the CA certificate.
2. Form 15CA - your own undertaking, filed on incometax.gov.in, cross-referencing the 15CB. Part C of Form 15CA is used where a 15CB is required; lower-value or specified remittances may use Part A or D.

You also sign an undertaking to the bank confirming the USD 1 million aggregate for the financial year has not been breached, per the RBI FAQ. Only after both forms are lodged and the tax cleared will the bank debit the NRO account and remit abroad. Where a single event - say a INR 12 crore property sale - exceeds USD 1 million at prevailing rates, the excess must either wait for the next financial year or be sent under a specific RBI approval. For context on the residents' side of the fence, the parallel outbound facility is the Liberalised Remittance Scheme at USD 250,000 a year, which NRIs cannot use for these NRO remittances.

One recurring mistake, examined in our Section 195 TDS guide for buyers, is under-deduction at completion: if the buyer withholds at 1 per cent instead of the Section 195 rate, the NRI's 15CB cannot be issued cleanly and the repatriation stalls until the shortfall is regularised. Getting the deduction right on day one is what keeps the USD 1 million window usable.

FAQ

Is the USD 1 million limit per person or per account?

It is per person per financial year (April to March). Under FEMA (Remittance of Assets) Regulations, 2016, an NRI or PIO may remit up to USD 1 million in aggregate from all NRO balances and asset sale proceeds combined - not USD 1 million per account. Amounts above USD 1 million in a year need prior RBI approval.

Do I need to pay tax before I can repatriate from my NRO account?

Yes. The remitting bank processes the outward transfer only after receiving Form 15CB from a Chartered Accountant certifying that applicable Indian taxes are paid or provided for, plus your Form 15CA undertaking filed on incometax.gov.in. TDS under Section 195 is deducted first where the payment is chargeable to Indian tax.

Can I repatriate rent and dividends over and above USD 1 million?

Yes. Current income such as rent, dividend, pension and interest is freely repatriable and sits outside the USD 1 million cap, per the RBI Remittance of Assets FAQ. Only capital-account items - NRO principal balances and asset sale proceeds - count towards the USD 1 million annual ceiling.

What TDS applies when I sell Indian property as an NRI?

The buyer must deduct under Section 195, not the 1 per cent used for resident sellers. On long-term gains the base rate is 12.5 per cent (Budget 2024) plus surcharge and 4 per cent cess; short-term gains are taxed at slab rates. Apply for a lower or nil deduction certificate under Section 197 to avoid over-withholding.

How do I avoid being taxed twice on the same gain?

Claim a foreign tax credit in your country of residence under the relevant DTAA article - Article 25 in the India-USA treaty. India taxes the gain first as source country; your home jurisdiction then credits the Indian tax paid. File Form 67 on the Indian portal and hold a Tax Residency Certificate plus Form 10F to claim treaty relief.

Does inherited property count within the USD 1 million limit?

Yes. FEMA 13(R)/2016-RB expressly covers remittance of sale proceeds of assets acquired by inheritance or legacy, and these count within the USD 1 million per financial year limit. You must furnish documentary evidence of the inheritance and the CA certificate confirming taxes.

What happens if I need to send more than USD 1 million in one year?

Remittances exceeding USD 1 million per financial year require prior approval from the Reserve Bank of India under FEMA 13(R)/2016-RB. In practice, many NRIs stage a large corpus across two financial years to stay within the automatic route, since the window resets every 1 April.