When an NRI decides to return to India, one of the most overlooked yet powerful tax concepts is the RNOR status (Resident but Not Ordinarily Resident).
It acts as a tax-friendly bridge between being an NRI and becoming a full resident of India.

At Dinesh Aarjav & Associates, we regularly advise global Indians on how to use the RNOR period strategically — to minimize double taxation, plan repatriations, and ensure compliance under both the Income Tax Act and FEMA.

In this blog, we’ll explain everything about RNOR — meaning, eligibility, duration, tax implications, and how to plan your return to India efficiently.

What Is RNOR (Resident but Not Ordinarily Resident)?

The Resident but Not Ordinarily Resident status is a special category of residency under Indian tax law.
It’s designed for individuals returning to India after spending years abroad, offering them partial tax exemptions on their global income during a transition phase.

In simpler terms:

• Resident: You have spent enough time in India to be considered a resident.
• Not Ordinarily Resident: You haven’t yet spent enough years in India to be taxed like a full resident.

This hybrid category ensures that when you move back, your foreign income doesn’t immediately become taxable in India.

Why RNOR Status Matters for Returning NRIs

For global Indians coming back home, RNOR status offers three major advantages:

• Tax Relief on Global Income – Income earned abroad (salary, dividends, rental income, or capital gains) remains non-taxable in India during your RNOR period.
• Continued Tax-Free Status on NRE/FCNR Deposits – The interest on NRE and FCNR accounts continues to be tax-free until your RNOR status expires.
• Smooth Tax Transition – You get time to restructure global assets, withdraw foreign retirement savings, or repatriate funds without immediate Indian tax impact.

Essentially, RNOR = soft landing for returning NRIs.

Who Qualifies for RNOR Status? (Eligibility Conditions)

You become an RNOR if you satisfy one of the following two key conditions:

• You were a Non-Resident in at least 9 out of the 10 previous financial years, OR
• You were physically present in India for 729 days or less during the 7 financial years preceding the current year.

If any one of these conditions is met — and you otherwise qualify as a resident for the current year — you’re classified as Resident but Not Ordinarily Resident (RNOR).

Additional Points to Note:

Under the Finance Act, 2020, if your Indian income (excluding foreign sources) exceeds ₹15 lakh, special rules may apply.

Certain individuals — particularly those of Indian origin who frequently visit India — should carefully evaluate the 120-day rule and its impact on residency.

Tip: Always maintain a detailed record of your travel dates and foreign income sources. A single day can change your residency status.

RNOR vs NRI vs Resident — Key Tax Differences

RNOR provides the best of both worlds — you are a resident (so you can invest freely in India), but you still enjoy most of the tax exemptions available to NRIs.

Duration of RNOR Status

The RNOR benefit generally lasts for up to two or three financial years after you return to India — depending on how long you stayed abroad before that.

However, this period is not fixed for everyone. The longer you were an NRI, the longer you can typically enjoy RNOR benefits. Once you meet the “ordinary resident” conditions, global income becomes taxable.

Example:
Suppose you were an NRI for 15 years and return in FY 2025-26. You may continue to qualify as RNOR until FY 2027-28, after which you’ll become a full resident.

Tax Implications for RNORs

1. Taxable Income in India

All Indian-source income such as:

• Salary received in India or for services rendered in India
• Rental income from property in India
• Business or professional income earned in India
• Interest from NRO accounts

…will be taxable as per the applicable income-tax slabs.

2. Non-Taxable Foreign Income

Income earned outside India will remain tax-free, unless:

• It’s received directly in India, or
• It arises from a business or profession controlled or set up in India.

This means your overseas salary, dividends, rental income, or capital gains remain untaxed during the RNOR phase.

3. Bank Accounts & Investments

• NRE/FCNR accounts – Continue to earn tax-free interest during RNOR period.
• RFC accounts (Resident Foreign Currency) – Useful for holding foreign funds in foreign currency even after return.
• Foreign investments – Income or capital gains from these remain exempt as long as they’re not repatriated to India.

How to Plan Your Move Back to India Using RNOR

• Time Your Return Strategically – Plan the date of return to maximize RNOR qualification for as many years as possible.
• Reorganize Global Assets – During RNOR, you can freely sell foreign property, redeem investments, or repatriate funds with minimal Indian tax exposure.
• Update FEMA & Bank Status – Convert NRE/NRO accounts to resident or RFC accounts once you return, as per FEMA guidelines.
• Consider DTAA Benefits – If you still have income abroad, utilize Double Taxation Avoidance Agreements (DTAA) through professional DTAA consultancy to avoid being taxed twice.
• Document Everything – Keep copies of travel records, foreign tax returns, and investment proofs for easy verification.

At Dinesh Aarjav & Associates, we assist returning NRIs with complete tax residency and NRI tax planning, including:

• RNOR eligibility assessment
• Conversion of NRI accounts
• Repatriation of assets
• Global income disclosure
• Structuring foreign holdings efficiently

Common Mistakes NRIs Make

• Ignoring Residency Calculations – Even a 1-day miscalculation can change your tax status.
• Not Informing Banks – Continuing NRE accounts post RNOR without intimation violates FEMA rules.
• Incorrectly Claiming Foreign Income as Exempt – Only specific types are exempt; business income linked to India is not.
• Delaying Financial Structuring – Failing to reorganize assets within RNOR period can lead to unnecessary future taxation.

Recent Amendments and the Changing Landscape

The Finance Act, 2020 significantly altered how RNOR eligibility is determined:

• The 120-day rule was added for certain high-income NRIs.
• The ₹15 lakh threshold determines when special residency rules trigger.
• Broader monitoring of global income disclosures has begun.

Therefore, every returning Indian should get their residential status professionally reviewed each year.

Frequently Asked Questions

Q1. How long can I enjoy RNOR status?
Generally up to 2–3 years, depending on your prior NRI period.

Q2. Do I need to declare foreign income while RNOR?
You don’t need to pay Indian tax on foreign income unless it’s received or controlled from India. But disclosure may be needed in your Indian return for compliance.

Q3. Is RNOR automatically granted?
No. It depends on your physical presence and past NRI years. You must evaluate and claim it correctly in your ITR.

Q4. Can I maintain NRE accounts as RNOR?
Yes, NRE/FCNR deposits can continue during RNOR and remain tax-free until maturity.

Q5. Should I file Indian tax returns as RNOR?
Yes, if you have taxable Indian income (rent, interest, etc.), you must file an Indian ITR, selecting “Resident but Not Ordinarily Resident” as your status.

Conclusion

The RNOR status is a powerful but time-sensitive opportunity for NRI returning to India. It allows you to:

• Enjoy tax-free foreign income
• Plan investments & repatriations efficiently
• Transition to full Indian residency smoothly

At Dinesh Aarjav & Associates, we help NRIs across the US, UK, UAE, Singapore, and Australia navigate this transition seamlessly — combining tax planning, FEMA compliance, and cross-border structuring.

If you’re planning to move back to India, reach out to our team for a personalized RNOR eligibility review and return-to-India tax strategy.