RNOR Tax Status —
Foreign Income Tax-Free for 2–3 Years
How a returning NRI qualifies as Resident but Not Ordinarily Resident, why foreign income stays exempt during this window, what happens to NRE interest, and the foreign-asset disclosure and FEMA steps to get right.
An NRI returning to India usually qualifies as RNOR (Resident but Not Ordinarily Resident) for about 2–3 years. During RNOR, only Indian-source income is taxed in India — foreign salary, foreign interest, overseas rent and foreign capital gains stay exempt (the one exception is income from a business controlled in, or a profession set up in, India). NRE-account interest also stays tax-free. Once RNOR ends and you become Resident and Ordinarily Resident (ROR), your global income becomes taxable in India.
RNOR is decided afresh every financial year under Section 6(6) of the Income-tax Act. Most people who were NRI for 10+ years enjoy it for 2–3 years after return, then switch to ROR. Plan the sale or repatriation of large foreign assets while you are still RNOR to keep those gains outside the Indian tax net.
NRI → RNOR → Resident: What Changes
How your Indian tax liability shifts as you move from Non-Resident to RNOR to full Resident. See our NRI income-tax guide for the wider picture.
| Status | Indian income | Foreign income | NRE interest | Foreign-asset disclosure |
|---|---|---|---|---|
| NRI (Non-Resident) | Taxed | Exempt | Tax-free | Not required |
| RNOR | Taxed | Exempt* | Tax-free | Schedule FA |
| ROR (Ordinarily Resident) | Taxed | Taxed (global) | Taxable | Schedule FA |
* Except income from a business controlled in, or a profession set up in, India (Section 5(1)). Schedule FA / FSI apply from your first resident year, including RNOR.
How You Qualify as RNOR
First you must be a resident for the year — normally 182+ days in India in that financial year (or 60+ days in the year plus 365+ days across the preceding 4 years). Once resident, you are RNOR if either of these is true:
- Condition A: you were a Non-Resident in 9 or more of the 10 preceding financial years, or
- Condition B: you were in India for 729 days or fewer during the preceding 7 financial years.
- Satisfy neither → you are ROR and your worldwide income becomes taxable in India.
A special rule can make a high-income Indian citizen who is not taxed in any other country a "deemed resident" and RNOR, but ordinary returning NRIs are governed by Conditions A and B above.
Residential status is not a one-time label — it is recomputed each financial year from your day-count and history. A short foreign posting, or crossing the 730-day / 10-year thresholds, can change your status. Keep a day-by-day travel log so the RNOR test can be evidenced.
Not sure whether you are RNOR or ROR this year?
Get your status checked →NRE Interest and Foreign-Asset Disclosure
Two things trip up returning NRIs most: what happens to NRE-account interest, and the duty to report foreign assets in the Indian ITR.
| Item | During RNOR | After ROR |
|---|---|---|
| NRE savings / deposit interest | Tax-free | Fully taxable |
| FCNR deposit interest | Tax-free | Taxable |
| Foreign salary / overseas rent / foreign gains | Exempt | Taxable (global) |
| Foreign assets in ITR (Schedule FA) | Must disclose | Must disclose |
NRE interest exemption runs until your status becomes ROR. NRE/FCNR interest exemption is linked to your FEMA/residential status, so redesignate accounts on time.
Once you are a resident — even RNOR — you must report all foreign bank accounts, shares, property and interests in Schedule FA (and FSI/TR) of ITR-2 or ITR-3. Non-disclosure can attract heavy penalties under the Black Money (Undisclosed Foreign Income and Assets) Act, 2015, independent of whether the income itself was taxable.
Need Schedule FA and FSI filled correctly?
File your NRI return →FEMA Steps and DTAA Relief
RNOR is an income-tax status; FEMA governs your bank accounts and foreign holdings separately. Get both aligned on return.
- Inform your bank of the change in residential status
- Redesignate NRE / FCNR accounts to Resident or RFC accounts
- Move retained foreign currency into an RFC account
- NRO accounts can be retained as-is
- File ITR-2 / ITR-3 with Schedule FA and Schedule FSI
- Claim Foreign Tax Credit via Form 67 (with a valid TRC)
- Keep a day-count travel log to evidence RNOR
- Review large foreign-asset sales while still RNOR
After RNOR ends, India taxes your global income, but Double Tax Avoidance Agreements (DTAA) under Section 90 stop the same income being taxed twice. Tax paid abroad is generally claimed as a Foreign Tax Credit in India by filing Form 67 before your return, supported by a Tax Residency Certificate. Read more on DTAA relief and Form 67.
RNOR does not change your regime choice. The new regime is the default (rebate u/s 87A up to Rs 12 lakh taxable income, Rs 75,000 standard deduction); the old regime lets you claim deductions such as home-loan interest u/s 24(b). Compare both on your Indian-source income.
Want your RNOR return and FEMA compliance handled end-to-end?
Talk to TaxClue →RNOR Status — Frequently Asked Questions
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