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RNOR status for returning NRIs: conditions, what is taxed and how to time your move

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In short

  • A returning NRI who becomes resident is 'not ordinarily resident' if non-resident in 9 of the 10 preceding tax years, or in India for 729 days or less in the 7 preceding years.
  • While RNOR, foreign income is taxed in India only if it comes from a business controlled in India or a profession set up in India, or is received in India.
  • Two more routes give RNOR status: the 120-day rule for visitors with over Rs 15 lakh of Indian income, and deemed residency.
  • Arriving on or after 2 October keeps you under 182 days for that tax year when February has 28 days, which can push your RNOR window a year later.

RNOR (resident but not ordinarily resident) is a transition status for people who become resident in India after years abroad. You qualify if you were non-resident in 9 of the previous 10 tax years. You also qualify if you spent 729 days or less in India over the previous 7 years. While RNOR, your foreign income generally stays outside Indian tax, so most returning NRIs get two or three years to reorganise their overseas finances.

The Income-tax Act, 2025 calls this status “not ordinarily resident” (NOR). The conditions sit in Section 6(13) of the 2025 Act, which took over from Section 6(6) of the 1961 Act from tax year 2026-27. The substance did not change.

Three statuses, three tax outcomes

Status Indian income Foreign income
Non-resident Taxed Not taxed
Resident but not ordinarily resident Taxed Taxed only if from a business controlled in India or a profession set up in India
Resident and ordinarily resident Taxed Taxed

Income received in India is taxed in every status. Section 5 of the 2025 Act sets this scope. If foreign income is paid straight into an Indian account, it can become taxable even while you are RNOR.

Step one: are you resident at all?

RNOR is a sub-category of resident. So first apply the normal day-count tests to the year you return.

You are resident if you spend 182 days or more in India in the tax year. You are also resident if you spend 60 days or more in the year and 365 days or more over the four preceding years.

If you fail both tests, you are simply non-resident for that year. The RNOR question does not arise. See our guide to the 182-day and 120-day rules for the full tests.

Step two: the two RNOR conditions

Once you are resident, you are RNOR if either of these is true. You need only one.

  1. Nine of ten years: you were non-resident in 9 out of the 10 tax years before the current one.
  2. 729 days in seven years: your total stay in India over the 7 tax years before the current one was 729 days or less.

The first condition helps people who were abroad for a long stretch. The second helps people who visited India only briefly during their years abroad.

Years before 1 April 2026 still count in the look-back. Their status is taken as decided under the 1961 Act.

Other routes to RNOR

The 2025 Act lists two further groups who are automatically NOR.

  • The 120-day route, Section 6(13)(b). A citizen or person of Indian origin with over Rs 15 lakh of Indian income may be resident under the 120-day test. If they spend 120 to 181 days in India, they are NOR.
  • The deemed-resident route, Section 6(13)(c). A citizen deemed resident under the Rs 15 lakh “not taxed anywhere” rule is also NOR.

These routes mostly apply to people still living abroad. A person who has moved back for good will usually rely on the two conditions above.

What is taxed while you are RNOR

Taxed in India:

  • salary for work done in India;
  • rent from Indian property;
  • interest on NRO, resident savings and fixed deposits in India;
  • capital gains on Indian shares, mutual funds and property;
  • any foreign income first received in India;
  • foreign income from a business controlled in India or a profession set up in India.

Not taxed in India:

  • interest on overseas bank deposits;
  • dividends and gains on foreign shares, received abroad;
  • rent from a house abroad;
  • foreign pension and retirement plan income received abroad;
  • interest on FCNR(B) deposits (see below).

The test for a foreign business is where it is controlled from. A US consulting practice you keep running from Bengaluru may be treated as controlled in India.

Bank accounts: NRE, FCNR and RFC

Bank account rules follow FEMA, not the Income-tax Act. Your FEMA status and tax status can change on different dates.

NRE accounts

Once you return for good, NRE and NRO accounts must be converted into resident accounts. The NRE interest exemption depends on being a person resident outside India under FEMA, not on your tax status. So NRE interest stops being exempt once FEMA treats you as resident, even during your RNOR years.

FCNR(B) deposits

RBI rules let banks allow an FCNR(B) deposit to run to maturity at the contracted rate after you return. From your return date, it is treated as a resident deposit for most purposes.

For tax, the 1961 Act exempted this interest for non-residents and people who were not ordinarily resident, under Section 10(15)(iv)(fa). The 2025 Act carries the exemption into its schedule of exempt income. FCNR interest therefore stays tax-free during RNOR years and becomes taxable once you turn ordinarily resident.

That makes an FCNR deposit maturing within your RNOR window an efficient bridge.

RFC accounts

On maturity, the bank converts the FCNR deposit into a resident rupee account or a Resident Foreign Currency (RFC) account. The choice is yours. RFC accounts let you keep money in US dollars, pounds, euros and some other currencies.

Banks treat RFC interest like resident account interest and deduct TDS on it. Some advisers argue it can qualify for the RNOR exemption. Confirm the treatment before relying on it.

Worked example: same person, two return dates

Sunita, an Indian citizen, has worked in California since 2014. She was non-resident in every tax year from 2014-15 to 2025-26. Each year she visited India for about 30 days.

Option A: she returns on 1 June 2026

From 1 June 2026 to 31 March 2027 she is in India for 304 days.

Tax year Days in India Non-resident in 9 of 10 preceding years? 729 days or less in 7 preceding years? Status
2026-27 304 Yes (10 of 10) Yes (about 210) RNOR
2027-28 366 Yes (9 of 10) Yes (about 484) RNOR
2028-29 365 No (8 of 10) No (about 820) Ordinarily resident

She gets two RNOR years. From 2028-29 her worldwide income is taxed in India.

Option B: she returns on 15 October 2026

From 15 October 2026 to 31 March 2027 she is in India for 168 days. That is below 182 days.

Her visits in the previous four years total about 120 days, below 365. So the 60 + 365 test also fails, and she is non-resident for 2026-27.

Tax year Days in India Status
2026-27 168 Non-resident
2027-28 366 RNOR (non-resident in 10 of 10 preceding years)
2028-29 365 RNOR (non-resident in 9 of 10 preceding years)
2029-30 365 Ordinarily resident

Moving the date by four and a half months buys one more year of non-resident status. Her full worldwide income becomes taxable a year later.

If her visits had been longer, totalling 365 days or more over the previous four years, the result could change. A returning NRI is not “coming on a visit”, so the 60 + 365 test may apply. Check the four-year total before relying on a late-year return.

How to plan your move date

  • Count the look-back first. List your days in India for each of the previous 7 tax years and your status for each of the previous 10.
  • Consider the second half of the year. A 1 October arrival gives exactly 182 days to 31 March, which makes you resident. Arriving on 2 October or later keeps you below 182, if February has 28 days. It works only if your four-year total is also below 365 days.
  • Sell or restructure foreign assets in RNOR years. Gains on foreign shares received abroad are outside Indian tax while you are RNOR. Your former country of residence may still tax them.
  • Keep money offshore until it is needed. Foreign income received in India is taxable even when RNOR.
  • Line up FCNR maturities. Deposits maturing before you turn ordinarily resident keep their interest tax-free.
  • Check the other country’s exit rules. The US, UK, Canada and Australia each have their own departure and residency rules.

The interaction between two countries’ rules is where a chartered accountant, ideally with a cross-border practice, earns their fee.

Common mistakes

  • Assuming RNOR lasts a fixed number of years. It depends on your own history. Some people get one year, some get three.
  • Bringing foreign income into India too early. Receipt in India makes it taxable, whatever your status.
  • Leaving the NRE account as it is. It must be redesignated once FEMA treats you as resident.
  • Using ITR-1. The income-tax department’s form guidance excludes not ordinarily resident individuals from ITR-1. Most RNOR filers use ITR-2.
  • Forgetting the look-back uses the old Act for old years. Status for years up to FY 2025-26 is decided under the 1961 Act.

What to do next

Sources

This guide explains the rules as they stood on 25 October 2026. It is general information, not tax, legal or financial advice. Rules change, and individual cases have exceptions, so confirm your position with a chartered accountant before acting. Spotted an error? Tell us and we will correct it.