Repatriation

What Is Repatriation?

Repatriation means sending money from India to a foreign country. In the context of FDI and NRI investment, it refers to transferring dividends, capital gains, sale proceeds, salaries, or other income earned in India back to the investor's home country.

India's foreign exchange regime permits repatriation, but with specific procedures and tax clearances. You cannot simply wire money out. The Authorized Dealer bank acts as the gatekeeper, ensuring each outward remittance complies with FEMA rules and tax obligations.

Legal Basis

Repatriation is governed by multiple provisions:

• FEMA Section 5 — Current account transactions (dividends, salaries, interest) are generally freely permitted
• FEMA Section 6 — Capital account transactions (sale proceeds, liquidation proceeds) are regulated
• FEMA 20(R), Rule 22 — Repatriation of FDI proceeds, conditions for sale of shares
• Section 393(2) of the Income-tax Act, 2025 (Table, Sl. No. 17; section 195 of the Income-tax Act, 1961) — Withholding tax, at the rates in force, on payments to non-residents
• Section 397(2) of the Income-tax Act, 2025 (section 206AA of the Income-tax Act, 1961) — Higher withholding of 20% (the floor sits at section 397(2)(b)(i)(C)) if the payee does not have PAN
• CBDT Rules 37BB — Form 145 (formerly Form 15CA) and Form 146 (formerly Form 15CB) requirements for outward remittances

Types of Repatriation

1. Dividend Repatriation

Dividends declared by an Indian company to its foreign shareholders are freely repatriable. No RBI approval needed. The process:

• The Indian company declares a dividend through a board resolution (interim) or shareholder resolution (final)
• Tax is deducted at source under section 393(2) at 20% — the dividend rate in section 207(1) (Table, Sl. Nos. 1–3) of the Income-tax Act, 2025 (section 115A of the Income-tax Act, 1961) — or at the lower DTAA rate if the shareholder provides a Tax Residency Certificate and Form 41 (formerly Form 10F)
• The company remits the net dividend amount through its AD bank
• Form 145 (Part C, since a CA certificate is needed for amounts above Rs 5 lakh under section 393(2)) is filed on the income tax portal
• Form 146 (CA certificate) is obtained and uploaded

2. Capital Gains Repatriation (Sale of Shares)

When a foreign investor sells their shares in an Indian company, the sale proceeds can be repatriated subject to:

• Payment of applicable capital gains tax (short-term or long-term, depending on holding period)
• Filing of Form FC-TRS with RBI (within 60 days of the transfer)
• Obtaining a No Objection Certificate (NOC) or tax clearance from the Income Tax Department (not always required, but the AD bank may insist)
• Forms 145 and 146 compliance for the outward remittance

3. Salary/Fee Repatriation

Foreign nationals working in India can repatriate their after-tax salary. No RBI approval needed if the salary has been earned in India and tax has been paid. The employer deducts TDS under Section 392 of the Income-tax Act, 2025 (section 192 of the Income-tax Act, 1961), and the net amount can be sent abroad through the AD bank.

4. Loan Repayment

External Commercial Borrowings (ECBs) taken by Indian companies from foreign lenders are repaid in foreign currency. The repayment schedule must comply with FEMA ECB guidelines (FEMA 8/2018-RB).

5. NRO Account Repatriation

NRIs can repatriate up to $1 million per financial year from their NRO accounts. This includes sale proceeds of assets, inheritance, rental income, and other permissible debits. The $1 million limit is a net ceiling (after deducting applicable taxes).

Forms 145 and 146 — The Twin Requirements

These forms are the biggest practical hurdle in repatriation:

Form 145

Filed electronically on the income tax e-filing portal by the person making the remittance (usually the Indian company). It has four parts:

• Part A — Remittances taxable under the Act that do not exceed Rs 5 lakh in the financial year (no CA certificate required)
• Part B — Remittances taxable under the Act that exceed Rs 5 lakh with an Assessing Officer certificate under section 395(1) or 395(2) of the Income-tax Act, 2025 (section 197 or section 195(2) of the Income-tax Act, 1961)
• Part C — Remittances taxable under the Act that exceed Rs 5 lakh with a CA certificate (Form 146)
• Part D — Remittances not chargeable to tax under the Act

Form 146

A certificate from a practicing Chartered Accountant (Form 146) confirming:

• The nature of the payment
• Applicable tax rate (domestic or DTAA, whichever is lower)
• Tax deducted at source
• Compliance with FEMA provisions
• Whether DTAA relief is available and the basis for claiming it

The CA uploads Form 146 to the portal, generating a unique acknowledgment number. This number is then entered in Form 145 Part C.

Common Repatriation Scenarios for Foreign Investors

Repatriation vs Non-Repatriation Basis

This is a critical distinction for NRI investments:

• Repatriation basis: Investment made through NRE or FCNR account. Counted as FDI. The invested amount and returns can be freely sent abroad. Subject to FDI caps and FC-GPR compliance.
• Non-repatriation basis: Investment made through NRO account. Counted as domestic investment. Not subject to FDI caps. But the invested amount cannot be freely repatriated — subject to the $1 million annual NRO repatriation limit.

Choosing the wrong basis at the time of investment creates problems later. Once shares are issued on a non-repatriation basis, they cannot be converted to repatriation basis.

Common Mistakes

• Skipping Forms 145 and 146 (which replaced Forms 145 and 146 from April 1, 2026). The AD bank will not process the outward remittance without a valid Form 145 acknowledgment. There is no prescribed legal time limit for the validity of a Form 146 certificate before remittance, though banks may have practical guidelines.
• Not deducting TDS before remitting. The Indian company must deduct withholding tax before sending the payment abroad. Remitting the gross amount and asking the foreign investor to pay tax later is a TDS default — the consequences in section 398 of the Income-tax Act, 2025 (section 201 of the Income-tax Act, 1961) apply, with interest at 1-1.5% per month under section 398(3)(a).
• Ignoring DTAA benefits. Many companies withhold at the full domestic rate (20% on dividends) even when a DTAA provides a lower rate. The foreign investor loses money, and recovering excess TDS through an Indian tax refund takes 12-24 months.
• Trying to repatriate NRO funds beyond $1 million. The $1 million limit per financial year is firm. If you have larger amounts, plan the repatriation over multiple years.
• Not getting PAN for the foreign investor. Without PAN, section 397(2) imposes a higher TDS rate of 20%; the relief that once let non-residents escape it by furnishing prescribed details is now framed as documents and information "as may be prescribed", so treat it as subject to rules to be prescribed. Getting PAN takes 15-20 business days for non-residents (applied through Form 49AA).

Practical Example

A German investor holds 40% equity in an Indian software company, acquired through FDI on a repatriation basis. The company declares a dividend of Rs 1 crore, of which Rs 40 lakh is the German investor's share.

Step 1: The company applies the India-Germany DTAA rate of 10% (Article 10, since the investor holds more than 10% equity). The German investor has already provided a TRC from the German Federal Central Tax Office and filed Form 41. TDS deducted: Rs 4 lakh.

Step 2: The company's CA prepares Form 146, certifying the DTAA applicability and TDS calculation.

Step 3: The company files Form 145 Part C on the income tax portal, referencing the Form 146 acknowledgment number.

Step 4: The company instructs its AD bank to remit Rs 36 lakh to the German investor's bank in Frankfurt. The AD bank verifies Form 145, checks the purpose code (S0901 for dividends), and processes the wire transfer.

The German investor receives the net amount. In Germany, he declares the dividend as worldwide income and claims a foreign tax credit for the Rs 4 lakh Indian TDS. No double taxation.

Key Takeaways

• Dividends and current account payments are freely repatriable after TDS
• Capital account repatriations (share sales) need FC-TRS and tax clearance
• Form 145/Form 146 is mandatory for taxable remittances above Rs 5 lakh to non-residents (effective April 1, 2026)
• NRO repatriation is capped at $1 million per financial year
• Choose repatriation vs non-repatriation basis carefully at the time of investment — it cannot be changed later

Need help repatriating funds from your Indian company? Beacon Filing manages Forms 145 and 146 and AD bank coordination.