Are Returning NRIs Losing US–India DTAA Benefits? OECD Commentary, RNOR Status & Tax Planning for 2025

Why Everyone Is Talking About DTAA and RNOR in 2025

Recently, thousands of NRIs planning to return to India from the USA have been asking whether they may lose DTAA tax benefits on income from the United States during their RNOR (Resident but Not Ordinarily Resident) period.

This debate was triggered by the OECD Commentary on the Model Tax Convention, which provides global interpretation guidelines for double taxation treaties. The commentary suggests that individuals who are not taxed on their worldwide income in a country might not qualify as tax residents of that country for treaty benefits.

For NRIs returning to India and becoming RNOR, this has raised concerns regarding:

• Taxation of US stock dividends
• US interest income
• 401(k), Roth IRA & pension withdrawals
• Remote work income from US companies
• Royalty or consulting income received from the USA

What Does the OECD Commentary Say?

According to the OECD discussion on Article 4 – Resident, a person may not be treated as a tax resident for treaty purposes if:

• They are taxed in that country only on income from sources within that country and not on global income.

This aligns directly with RNOR status in India, because:

• RNORs are not taxed in India on foreign-source income
• They may technically be considered residents only on a limited tax basis

This theoretical interpretation has led practitioners to discuss the possibility that the US may not allow treaty-based reduced withholding tax rates for RNOR individuals when filing Form W-8BEN from India.

What Could This Mean for NRIs Returning to India

If implemented in practice, treaty benefits under the India–US DTAA could become unavailable during RNOR status:

This affects NRIs:

• Moving back to India in 2025–26
• Holding significant investments in the US
• Considering remote employment from India for US employers
• Planning asset repatriation

But Here Is the Most Important Point

There is NO official rule change.

• No notification from the Indian Government
• No update from the IRS or US Treasury
• No amendment in the India–US DTAA

Right now, this is only a professional conversation based on interpretative guidance, not an actionable regulation.

Should Returning NRIs Worry?

No — not at this stage

• Nothing concrete has been implemented
• Tax law changes are always prospective
• Adequate transition time is always given for restructuring
• RNOR continues to be one of the most powerful tax-planning tools

RNOR – Still the Golden Opportunity for Returning NRIs

RNOR Status Benefits:

• No tax in India on global income
• No taxation on foreign capital gains
• Foreign assets need not be reported in Schedule FA
• Ideal time to manage US investments, ESOPs, RSUs & retirement accounts

RNOR is still the best tax optimisation route for NRIs returning from the USA, UK, UAE, Canada or Singapore, and remains a powerful NRI taxation advantage for those planning their move back to India.

What Returning NRIs Should Do Now

Strategic Planning Actions

• Review return timing to maximize RNOR period
• Re-evaluate US investment holding structures
• Plan repatriation via NRE/NRO/FCNR strategically
• Maintain documentation supporting residency position
• Consult a cross-border tax expert rather than reacting emotionally

How Dinesh Aarjav & Associates Helps Returning NRIs

We are a 25+ year global NRI & cross-border tax consulting firm, advising clients in the USA, Canada, UAE, UK, Singapore & Australia.
We assist with:

Our Returning to India Services

• RNOR tax planning & optimization
• DTAA India USA interpretation
• NRI tax filing in India & USA
• 401k / IRA / RSU / ESOP taxation planning
• Investment restructuring & repatriation
• Residential status calculation & planning
• Remote job structuring from India

Book an Expert Strategy Consultation

Helping NRIs return to India tax-efficiently and stress-free

Conclusion

There is no confirmed taxation change for RNORs and no official withdrawal of DTAA benefits.
The discussion originates from OECD commentary, not real policy change.

Best approach today

• Stay informed
• Plan ahead
• Optimize RNOR
• Don’t panic or rush decisions