The IRS does not let you keep money in a tax-deferred retirement account forever. Once you turn 73, it requires you to withdraw a set amount each year, called a required minimum distribution.
Miss the deadline and you owe a 25% excise tax on the amount you failed to withdraw. For NRIs managing US retirement accounts from India or any other country, this obligation applies just as strictly as it does for US residents.
This guide explains what a required minimum distribution is, how to calculate it, and the specific tax angles that matter most when you live outside the US.
What is a required minimum distribution?
A required minimum distribution is the minimum amount the IRS requires you to withdraw from most tax-deferred retirement accounts each year after you reach a certain age.
The legal basis is IRC Section 401(a)(9), which prevents you from using a retirement account as a permanent tax shelter that passes wealth to heirs without ever being taxed.
The key exception is the Roth IRA. You contributed after-tax dollars into a Roth IRA, so the IRS does not require withdrawals from it during your lifetime. All other common retirement account types are subject to the rules described below.
Which accounts require an RMD?
Any account that received a tax deduction on contributions is generally subject to RMDs. The table below shows the most common account types and whether they trigger the withdrawal requirement.
| Account type | RMD required? |
|---|---|
| Traditional IRA | Yes |
| Rollover IRA | Yes |
| SEP IRA | Yes |
| SIMPLE IRA | Yes |
| 401(k) | Yes |
| 403(b) | Yes |
| 457(b) government plan | Yes |
| Roth IRA | No (while owner is alive) |
| Designated Roth 401(k) | No (after 2023, per SECURE 2.0) |
| Inherited IRA | Yes (different schedule applies) |
If you hold IRAs from your time working in the US, check each account type separately. The rules differ between traditional and Roth accounts, and many NRIs hold more than one type across multiple employers.
When do RMDs start?
Your RMD start age depends on when you were born. If you were born between 1951 and 1959, your first required minimum distribution is due in the year you turn 73. If you were born in 1960 or later, the starting age is 75, a change that takes full effect from 2033 under the SECURE 2.0 Act.
You can delay your very first RMD until April 1 of the year after you turn 73. The catch is that your second RMD is still due on December 31 of that same year. Taking two distributions in one calendar year raises your total taxable income for that year, which can push you into a higher bracket in both the US and India.
There is one exception for 401(k) plans. If you are still actively working for the employer that sponsors the plan, you can delay that plan's RMDs until you retire. This does not apply to IRAs. For NRIs, timing RMDs around your residency status in India can significantly reduce your combined tax liability, and this is covered in detail later. For broader context on 401k retirement planning as an NRI, the linked guide covers the full picture.
How is an RMD calculated?
The formula divides your account balance on December 31 of the previous year by a life expectancy factor from the IRS Uniform Lifetime Table. This table is found in IRS Publication 590-B, Table III. At age 73, the factor is 26.5. The factor decreases by roughly one each year, so your RMD amount grows as a share of your balance over time.
Example: Amit is 73 years old and has $500,000 in his Traditional IRA. His RMD for the year is $500,000 divided by 26.5, which equals $18,868. He must withdraw at least this amount before December 31.
If Amit has multiple IRAs, he calculates each one separately but can take the combined total from any mix of those accounts. For a 401(k), the math works the same way, but the distribution must come from that specific plan. An IRA withdrawal cannot satisfy a 401(k) RMD.
What happens if you miss an RMD?
If you do not take your full required minimum distribution by the deadline, the IRS charges a 25% excise tax on the amount you failed to withdraw. Before the SECURE 2.0 Act in 2022, this penalty was 50%. The reduction matters, but 25% is still a significant cost on money you would have received anyway.
If you catch the mistake within two years and take the missed distribution, the penalty drops to 10%. You report the error and request a waiver using IRS Form 5329. The IRS regularly waives the penalty for first-time mistakes if you act quickly and show it was unintentional.
Living abroad does not protect you. The IRS applies RMD penalties to non-residents and US residents equally. If you are managing US retirement accounts from India, you need to track the December 31 deadline yourself because the IRS will not remind you.
RMD rules for NRIs: how US taxes apply
When you take an RMD as a non-resident of the US, the plan administrator withholds 30% by default and sends it to the IRS on your behalf. This is the standard non-resident withholding rate.
Filing Form W-8BEN with your plan administrator lets you claim benefits under the India-US DTAA. Once on file, your administrator applies the treaty rate instead of the 30% default. Article 20 of the India-US tax treaty covers periodic pension and retirement income. If your RMDs are structured as regular monthly or quarterly payments, they qualify as periodic income under the treaty. The tax is then due only in your country of residence, which means the US withholding drops to zero if you are a tax resident of India.
Lump sum withdrawals work differently. They fall under Article 23 (Other Income) of the treaty rather than Article 20. Both the US and India can tax a lump sum, which means you could face 30% US withholding and Indian slab tax on top of that. Setting up regular distributions and filing W-8BEN before your first RMD is a straightforward step that most NRIs skip simply because they do not know it is required.
How India taxes your RMDs
If you are RNOR (Resident but Not Ordinarily Resident)
When you return to India after years abroad, you typically qualify for RNOR status for the first two to three years. During this period, your foreign income is not taxable in India. RMDs from US retirement accounts are foreign source income during your RNOR years, so they generally fall outside Indian tax entirely.
Timing larger distributions to fall within your RNOR period can let you receive a meaningful share of your retirement savings with little or no combined tax across both countries. This is one of the most valuable windows available to returning NRIs, and it closes once you become a full resident.
If you are ROR (Resident and Ordinarily Resident)
Once you become an ROR, your global income is taxable in India at the applicable slab rate, which goes up to 30% plus surcharge and cess. Your RMDs become part of your taxable income in India at that point.
Section 89A of the Indian Income Tax Act gives some relief. Under Section 89A, India does not tax your US retirement account income as it accrues inside the account. It taxes it in the year you actually withdraw, which is precisely when the RMD happens. This prevents a situation where India taxes income that is still locked in a US account you cannot yet access. India has notified the US as a country whose retirement accounts are covered by Section 89A, so you can claim this benefit by reporting it correctly in your ITR. You must declare your foreign retirement accounts in your Indian income tax return each year, even in years when you take no distribution.
Common RMD mistakes NRIs make
The most frequent mistake is missing the RMD entirely while living abroad. The IRS does not send reminders to foreign addresses, and many US plan administrators do not track non-resident account holders closely. You are responsible for knowing the deadline and acting on it.
The second mistake is taking a lump sum instead of setting up regular periodic distributions. A lump sum does not qualify for treaty protection under Article 20 of the DTAA. You lose the 0% US withholding rate, and once you are an ROR in India, India taxes it at your full slab rate too. The same total amount taken as monthly distributions throughout the year is treated far more favourably.
The third mistake is not filing Form W-8BEN. Without it, your plan administrator defaults to 30% withholding on every distribution, regardless of what the treaty says you are entitled to. The form is simple, only needs your country of residence and tax identification number, and must be renewed every three years. The fourth mistake is taking large distributions before establishing RNOR status in India, which means you miss the window where those withdrawals would be entirely free from Indian tax.
Conclusion
Required minimum distributions start at age 73 for those born between 1951 and 1959, and at 75 for those born in 1960 or later. The obligation follows you regardless of where you live. As an NRI, your two most important tools are Form W-8BEN and the India-US tax treaty.
File W-8BEN with your plan administrator, set up your required minimum distributions as periodic payments rather than lump sums, and time larger withdrawals around your RNOR period if you have recently returned to India.
Before your first RMD arrives, speak with a cross-border tax advisor who understands both the IRS rules and the Indian tax implications.
Frequently asked questions
Do NRIs have to take RMDs?
Yes. The RMD obligation applies to all US retirement account holders regardless of where they live.
If you have a Traditional IRA, 401(k), SEP IRA, or other tax-deferred account and have reached the required starting age, you must take your distribution by December 31 each year. Your first RMD can be delayed to April 1 of the following year, but the 25% penalty for missing the deadline applies equally to NRIs and US residents.
Can I skip my RMD if I move back to India?
No. Moving to India changes how your RMD is taxed, not whether you must take it. File Form W-8BEN, structure your distributions as periodic payments, and time them within your RNOR period if possible. The obligation to withdraw remains. What shifts is the tax outcome on both sides.
Can a husband and wife combine their RMDs?
No. RMDs are calculated separately for each person and each account. A husband and wife cannot pool their required distributions or satisfy one person's RMD from the other's account. Each person calculates and takes their own distribution each year from their own accounts.
Does India tax my RMD if I am RNOR?
No. During your RNOR period, foreign income is not taxable in India. RMDs from US retirement accounts are treated as foreign source income, so they are generally not included in your Indian taxable income for those years.
Once you become an ROR, your RMDs are taxable in India at your slab rate, though Section 89A defers taxation to the year of withdrawal rather than the year of accrual. For more on how dual tax residency affects which country taxes your income and when, that guide covers the key rules in detail.