Required Minimum Distribution Rmd

Required Minimum Distribution (RMD) is a US retirement account regulation that mandates withdrawals from tax-deferred retirement accounts — including Traditional IRAs, 401(k) plans, and 403(b) plans — beginning at a specified age, preventing indefinite tax deferral of retirement savings. The RMD rules require account holders to withdraw a minimum amount each year based on their account balance and IRS life expectancy tables — with the withdrawal amount increasing as the account holder ages. Failure to take the required minimum distribution results in a 25% (reduced from 50% in 2023) excise tax on the amount that should have been withdrawn. The SECURE Act 2.0 (2022) raised the RMD starting age from 72 to 73, with further increases planned for subsequent years. For Indian NRIs and resident Indians with US retirement accounts — many Indian technology professionals who worked in the US accumulated 401(k) and IRA balances before returning to India — RMD rules create mandatory taxable distribution obligations that must be carefully planned for. RMD amounts are subject to US income tax and may also have Indian tax implications depending on the India-US DTAA treatment. The closest Indian conceptual equivalent to RMD is the mandatory annuity purchase requirement under NPS — where at least 40% of the NPS corpus must be used to purchase an annuity providing regular income at retirement, rather than being taken as a lump sum — ensuring that a portion of retirement savings provides guaranteed lifetime income.