NRO account taxation and repatriation limits for NRIs

Editorial Note: VedaMoney is reader-supported. When you buy or transfer money through links on our site, we may earn an affiliate commission at no extra cost to you. Read our full disclosure here.

NRO accounts are the default gateway for NRIs who earn an income stream in India—rent from a Chennai flat, dividends from an Indian equity portfolio, or the occasional fixed deposit matured at a bank branch. They look and feel like regular savings accounts, but the taxman treats them differently the moment you step outside India’s borders. If you’re living in the Gulf, the US, the UK, Singapore, or Australia, any interest, dividend, or rental credit to your NRO account is subject to Indian income tax, regardless of where you reside.

India’s financial year runs from 1 April to 31 March, and the tax treatment depends on your residential status for that year. For most NRIs, NRO interest is taxed at the slab rate, but banks often deduct TDS at 30 per cent if your PAN is not linked or if you fall into the highest bracket. Beyond the tax bite, the bigger question is repatriation: how much of the balance you can move to your overseas bank account, and under what conditions. Many NRIs discover the hard way that you cannot simply transfer the entire corpus; there’s a ceiling, a paperwork trail, and a sequence of compliance steps you must follow.

This guide walks you through the taxation basics, the current repatriation ceiling, the paperwork you’ll need, and the common traps that catch out even seasoned expats. By the end, you’ll have a checklist, FAQs, and the confidence to keep your money working across borders—without the guesswork or the panic.

Rohan: My NRO interest got taxed at 30 per cent even though I’m in the 20 per cent slab—is the bank just being greedy?

Veda: Banks deduct TDS at 30 per cent if they don’t have your PAN or if you’re classified as a non-resident without a lower‑tax certificate. You can file Form 10‑E or submit a CA‑certified estimate to claim the correct slab rate when you file your return.

Rohan: Okay, so what can I actually send to my US bank? I heard there’s a million‑dollar cap—does that mean I’m stuck if I have more than that in my NRO?

Veda: The $1 million limit is per financial year, and it applies to the principal amount, not the interest. You’ll need a Chartered Accountant’s certificate in Form 15CB, a 15CA filing, and proof that all due Indian taxes have been paid before the bank releases the amount.

Rohan: I filed my ITR last month, but the bank still asks for a CA certificate. Do I really need it for every repatriation request, or is it a one‑time thing?

Veda: It’s per transaction. Each repatriation above a certain threshold—currently anything over $5 lakh—requires a CA‑signed Form 15CB, which certifies that the tax obligations for that specific remittance are satisfied. Keep the certificate handy; it’s valid for that remittance only.

Rohan: What about the rupee‑to‑dollar conversion? My bank uses their own rate, and I end up with fewer dollars than I expected. Is that normal?

Veda: Banks are free to apply their own RBI‑approved reference rate for the day of the transaction. If you’re moving a sizeable amount, you can ask for the rate used in your ITR or seek a forward contract from an authorised dealer to lock in a rate ahead of time.

Rohan: I have an NRE account too—does that change the tax game? I thought NRE was tax‑free in India.

Veda: Exactly. NRE accounts hold foreign earnings and the interest is exempt from Indian income tax, plus full repatriation without the $1 million ceiling. NRO is for India‑sourced income only, so the tax and limits apply there, not to NRE.

Rohan: Any quick tip I can use before I call my bank tomorrow? I don’t want to waste a whole day on paperwork.

Veda: Gather your PAN, the last two years’ ITR acknowledgements, and a CA‑certified Form 15CB estimate before you walk in. Mention you’re claiming repatriation under the $1 million head, and ask the branch to walk you through the 15CA online filing—it’s a single‑page form once your docs are in order.

How NRO Accounts Are Taxed in India

Every rupee that lands in an NRO account is treated as income earned in India, and Indian tax law doesn’t care where you currently live. Whether you’re sipping chai in a Doha villa or working a nine‑to‑five in Toronto, the interest, dividends, and rental credits in your NRO account are subject to Indian income tax. The tax year runs from 1 April to 31 March, and your residential status for that period decides which slab applies. Most NRIs fall into the 30 per cent plus surcharge and cess category if their global income pushes them high, but you can claim the benefit of your home‑country tax treaty if one exists.

Banks usually deduct TDS at the rate of 30 per cent when they don’t have a valid PAN, or when you don’t submit Form 10‑E requesting a lower deduction. The good news? You can claim credit for that TDS when you file your Indian income‑tax return. If you’ve already paid tax in your country of residence, you might get relief under the Double Taxation Avoidance Agreement (DTAA) between India and that country, but you’ll need to provide the relevant residency certificate and self‑declaration.

Interest Income

Say your NRO fixed deposit earns ₹1.2 lakh in interest over a year. The bank will likely withhold ₹36,000 as TDS at 30 per cent. At filing time, you report the full ₹1.2 lakh under “Income from Other Sources” and claim the TDS as a credit. If you’re in the 20 per cent slab, you may end up paying only an additional ₹12,000, or you could get a refund if your total Indian income is below the taxable threshold.

Capital Gains

If you sell an asset that was held in your NRO account—such as mutual fund units or shares—the sale proceeds are subject to capital‑gains tax. Short‑term gains (held less than 24 months for equity, less than 12 months for other assets) are added to your income and taxed at your slab rate. Long‑term gains enjoy a 10 per cent tax without indexation for listed equity, or 20 per cent with indexation for other assets. The buyer of the asset will also deduct TDS at the applicable rate, which you can later adjust in your return.

Repatriation Limits: What You Can Move Abroad

The $1 million ceiling is the most talked‑about rule, but it’s often misunderstood. This limit applies to the principal balance in your NRO account, not the interest you’ve earned. You can repatriate up to USD 1 million per financial year (April‑March), and only after you’ve satisfied three conditions: you must be a genuine NRI, all Indian taxes due on the NRO income must be paid or provided for, and you must submit the prescribed documentation to the bank.

The documentation stack includes: a Chartered Accountant‑signed Form 15CB, which certifies that the tax obligations for that specific remittance are complete; Form 15CA, an online declaration filed on the Income‑Tax e‑filing portal; and a CA‑certified statement of the NRO account balance and the nature of the remittance. If you’re moving less than USD 5 lakh in a single transaction, Form 15CB is not required, but Form 15CA is still mandatory. The bank will verify these before crediting the dollars to your overseas account.

Current Limits and Documentation

Let’s say you have ₹80 lakh in your NRO account and you’ve paid all taxes for the year. You want to send $80,000 to your UK bank. You’ll file Form 15CA online, upload the CA‑signed Form 15CB, and the bank will process the remittance. If you attempt to send $1.2 million in one go, the bank will block the excess and ask you to split the request across two financial years, or provide additional justification under special categories—though the standard route caps at $1 million per year.

Checklist: Is Your NRO Compliant?

Your PAN is linked and active with the bank and the Income‑Tax e‑filing portal.
You have filed your Indian income‑tax return for the relevant financial year, reporting all NRO income.
TDS certificates (Form 16A or the bank’s TDS statement) are handy for claiming credit.
If repatriating, you have a recent CA‑signed Form 15CB (or confirm the transaction is below ₹5 lakh, exempting Form 15CB).
Form 15CA has been filed online, and the acknowledgment receipt is saved.
You have proof of the NRO account balance and the source of funds (e.g., rent agreement, dividend warrant).
You’ve checked the current RBI master direction on NRO repatriation, as limits and procedures can change via circulars.

One of the most frequent surprises NRIs face is assuming that the $1 million limit resets every calendar year. It doesn’t—it’s tied to the Indian financial year, 1 April to 31 March, so any unused allowance vanishes on 31 March. Another common error is forgetting to file Form 15CA before the bank processes the transfer; the bank will reject the request and may even freeze the NRO account for non‑compliance. Some also try to repatriate NRO funds from an NRE account by mistake, only to learn that NRE balances are fully repatriable without any ceiling, making the NRO paperwork unnecessary. Lastly, many NRIs ignore the DTAA benefit, filing Indian returns at the full 30 per cent when a lower treaty rate might apply, simply because they didn’t submit the required residency certificate to the bank.

Frequently Asked Questions

Do I need to pay tax in India on NRO interest if I’m already taxed in the US/UK/Gulf?

Yes, Indian law treats NRO interest as taxable income in India, regardless of where you reside. However, the Double Taxation Avoidance Agreement between India and your country of residence may allow you to claim a credit or a reduced rate. You’ll need to file the appropriate residency certificate and disclose the foreign tax paid in your Indian return. Many NRIs in the Gulf benefit from the fact that their country has no income tax, so the full Indian slab applies, but they can still claim the TDS already deducted by the bank.

Can I repatriate my entire NRO balance in one financial year?

Only up to USD 1 million of the principal amount is allowed per financial year, and that too after you’ve filed Form 15CA, obtained a CA‑signed Form 15CB (for amounts over USD 5 lakh), and proven that all due Indian taxes have been paid or provided for. Any amount above the ceiling must wait until the next financial year, or you may explore other structures like shifting the India‑sourced income to an NRE account, which has no such ceiling.

What’s the difference between NRO and NRE repatriation, and does it affect my tax liability?

NRE accounts hold foreign‑earned income; the interest is exempt from Indian tax, and the full balance is freely repatriable without any dollar cap. NRO accounts are for India‑sourced income (rent, dividends, etc.); the interest is taxable in India, and repatriation is capped at $1 million per year with documentation. Choosing the right account type at the outset can save you significant tax and paperwork down the line.

For verification, you can consult the following official sources:

Reserve Bank of India: https://www.rbi.org.in/
Income Tax Department of India: https://www.incometax.gov.in/iec/foportal/
Internal Revenue Service (IRS): https://www.irs.gov/

Disclaimer: The information provided by VedaMoney is for educational purposes only and does not constitute professional financial or tax advice.