Moving Back to India: RNOR Status and Tax Planning for Returning NRIs
Last updated: 13 October 2026
Quick answer: RNOR status ("resident but not ordinarily resident") applies to most NRIs in their first two or three years back. Under section 6(13) of the Income-tax Act 2025, you qualify if you were non-resident in 9 of the previous 10 tax years, or spent 729 days or less in India over the previous 7. While RNOR, India taxes your Indian income but generally not income earned abroad.
Last updated: 13 October 2026 Quick answer: RNOR status ("resident but not ordinarily resident") applies to most NRIs in their first two or three years back. Under section 6(13) of the Income-tax Act 2025, you qualify if you were non-resident in 9 of the previous 10 tax years, or spent 729 days or less in India over the previous 7. While RNOR, India taxes your Indian income but generally not income earned abroad. Key takeaways Residency first: 182 days in India, or 60 days plus 365 days over four prior years, makes you resident. RNOR tests: 9 of 10 years non-resident, or 729 days or less in 7 years; either is enough. Foreign income: not taxed while RNOR unless from a business controlled or profession set up in India (section 5). Timing: returning after early October can turn the year of return into a non-resident year. Retirement accounts: Form 40 under section 158 defers Indian tax on 401(k)/IRA accruals. Priya and Karthik moved back to Pune from Seattle after eleven years. They kept their US shares and sold them in their third year back, after they had become ordinarily resident. India taxed the whole gain. Had they sold during their first two years, while RNOR, India would not have taxed it at all. Returning NRIs often make their biggest tax decisions before they understand how residency works. This guide explains the residency tests under the Income-tax Act 2025, how RNOR status works, what is and is not taxed, how your return date changes the outcome, and what to do with FCNR deposits and foreign retirement accounts. How is residential status decided under the Income-tax Act 2025? Section 6 of the Income-tax Act 2025 decides residence one tax year (April to March) at a time. Under section 6(2), an individual is resident if either test is met: 182-day test: in India for 182 days or more in the tax year; or 60-day test: in India for 60 days or more in the year, and 365 days or more in the four preceding tax years. There are important exceptions. An Indian citizen leaving India for employment abroad that year is judged only on the 182-day test. A citizen or person of Indian origin "coming on a visit" is also judged on 182 days, except that the 60-day figure becomes 120 days if their Indian income exceeds ₹15 lakh. The visit relaxation does not help in the year you return for good. Someone moving back is not visiting, so the ordinary 60-day test applies. That matters when you plan your arrival date, as the timing section shows. Finally, section 6(7) deems an Indian citizen resident if they are not liable to tax in any other country and their Indian income exceeds ₹15 lakh. Such a deemed resident is automatically RNOR. What is RNOR status, and who qualifies? RNOR is a transitional category. You are a tax resident of India, but you have only recently arrived, so India does not yet tax your worldwide income. Section 6(13) lists four routes, and meeting any one is enough. Route Condition Typical case Section 6(13)(a)(i) Non-resident in 9 of the 10 preceding tax years Long-term NRI in first one or two years back Section 6(13)(a)(ii) In India 729 days or less across the 7 preceding tax years Often extends RNOR by a year Section 6(13)(b) Citizen or PIO with Indian income over ₹15 lakh, in India 120 to 181 days Frequent visitor with large Indian income Section 6(13)(c) Citizen deemed resident under section 6(7) Living in a no-tax country with Indian income over ₹15 lakh RNOR status conditions under section 6(13) of the Income-tax Act 2025 for returning NRIs How is foreign income taxed when you are RNOR? Section 5(1) of the 2025 Act sets the scope of income for residents. For a person who is not ordinarily resident, income that accrues or arises outside India is included only if it comes from a business controlled in India or a profession set up in India. In practice, during your RNOR years: Taxed in India: Indian salary, rent from Indian property, Indian interest, dividends and capital gains on Indian assets. Anything received in India is also taxed. Not taxed in India: interest on foreign bank accounts, dividends from foreign shares, rent from a flat abroad, and capital gains on foreign assets, provided they accrue and are received outside India. Taxed even as RNOR: income from a foreign business you now run from India, or fees from a profession you set up in India. Two further reliefs apply. FCNR deposit interest stays exempt while you are RNOR. And under section 263, the requirement to file a return just because you hold foreign assets applies to residents other than RNORs. You start reporting foreign assets in Schedule FA from your first year as resident and ordinarily resident (ROR); see Schedule FA explained (/insights/foreign-assets-schedule-fa-india) . You still file an Indian return in ITR-2 if you have taxable Indian income. Our guide on which ITR form to file (/insights/which-itr-form-to-file) covers the choice. RNOR tax treatment compared with non-resident and resident ordinarily resident status in India Does the date you return change how long you are RNOR? Yes, often by a full year. Consider an NRI who left India in 2015 and visited for about 30 days each year. Compare a return on 1 August 2026 with one on 15 November 2026. Tax year Return 1 Aug 2026 Return 15 Nov 2026 2026-27 243 days in India: resident; RNOR (non-resident 9 of 10 prior years) 137 days; fails 60-day test as prior four years total only about 120 days: non-resident 2027-28 RNOR (non-resident 9 of 10 prior years) RNOR 2028-29 ROR: resident in 2 of 10 prior years, and about 758 days in the prior 7 RNOR (still non-resident 9 of 10 prior years) 2029-30 ROR ROR: about 987 days in the prior 7 years The August returnee gets about 20 months during which foreign income stays outside Indian tax. The November returnee gets roughly 40, because the year of return counts as a non-resident year. The year of return is non-resident only if you spend under 182 days in India that year and either under 60 days that year or under 365 days in the four previous years. For most long-term NRIs, that means arriving after about 1 October. A later arrival is not always better. Your host country may tax you as resident for longer, and family, school and job dates matter more than tax. But if you have flexibility, run the day count before booking tickets. Returning NRI timing example showing how the return date changes years of RNOR status What should you do with NRE, NRO and FCNR accounts? Bank accounts follow FEMA, not the Income-tax Act. Under FEMA you become a resident as soon as you return to live in India. RBI's Master Direction on Deposits and Accounts (updated 2 September 2026) says NRE accounts should be redesignated as resident accounts, or moved to a Resident Foreign Currency (RFC) account, immediately on return. NRO accounts become ordinary resident accounts. NRE interest becomes taxable from the date of return, because its exemption depends on FEMA status, even while you are RNOR for income tax. FCNR(B) deposits can run to maturity at the contracted rate. Interest stays exempt while you are RNOR. On maturity, move the money to an RFC account or convert to rupees. RFC accounts let you hold foreign currency in India indefinitely, which helps if you may need dollars later for a child's education. Section 6(4) of FEMA lets a returning resident keep foreign currency, foreign securities and property acquired while living abroad, along with the income from them. You do not have to sell or bring everything home. Our guide to NRE vs NRO vs FCNR accounts (/insights/nre-vs-nro-vs-fcnr-accounts) covers conversion in detail. What happens to your 401(k), IRA and other foreign retirement accounts? Most returning NRIs leave retirement savings abroad, at least initially. The tax question is when India taxes the growth. Section 158 of the Income-tax Act 2025 (the old section 89A) addresses the mismatch. If you opened a retirement account in a notified country while resident there and non-resident in India, you can elect to have India tax the income only when you withdraw it, matching the foreign country. The notified countries are the USA, the UK, Canada and Australia. The election is made in Form 40 (formerly Form 10EE), online, before the due date of your return. It must cover all your retirement accounts in that country. Once made, it cannot be withdrawn for that year and continues for later years. While RNOR, foreign accruals are generally outside Indian tax anyway, so section 158 matters most from your first ROR year. Separately, the country where the account sits will tax withdrawals under its own rules. US 401(k) withdrawals before age 59½ usually attract an extra 10% penalty, so take cross-border advice before cashing out. How can you use the RNOR years well? The RNOR window is a planning opportunity, not just a status. Common moves, each to be checked against your host country's tax rules: Realise foreign gains during RNOR. Selling appreciated foreign shares or funds while RNOR, with proceeds received abroad, keeps the gain outside Indian tax. If you buy again, the higher cost becomes your base for future Indian tax. Collect foreign receipts before you turn ROR. Final bonuses, deferred pay and foreign interest accrued abroad are best received in this window. Do not rush money into India. Foreign income received in India is taxable even when RNOR. Bring capital, not fresh income, and keep records showing the source. Watch vesting RSUs and ESOPs. Shares that vest after you return can be partly taxable in India depending on where the work was done. See our guide to ESOP and RSU taxation (/insights/esop-rsu-taxation-india) . Remember US citizenship. US citizens and green-card holders stay taxable in the US on worldwide income until status ends, whatever their Indian status. For mutual fund choices, read US and Canada NRIs and Indian mutual funds (/insights/nri-us-canada-mutual-fund-investment) . Rebuild your Indian portfolio deliberately. Once resident, you can invest through any fund house without NRI restrictions. A phased plan avoids putting a lump sum in at one market level; see NRI investing from Pune (/insights/nri-investment-advisor-in-pune) . Checklist for returning NRIs covering bank accounts, FCNR, KYC, Form 40 and health insurance Insurance and documentation Buy Indian health insurance soon after returning. Waiting periods for existing illnesses only start once a policy is issued, and employer cover may not include parents. Our insurance for NRIs guide (/insights/insurance-for-nris-india) explains what to set up. Keep passport copies with every entry and exit stamp; they are your evidence of day counts if the tax department asks. Common mistakes returning NRIs make Selling foreign investments after turning ROR, when a sale during the RNOR years would have stayed outside Indian tax. Continuing to claim NRE interest as exempt after returning. Remitting foreign salary or interest into India during RNOR years, making it taxable. Assuming the 182-day visitor rule applies in the year of permanent return. Forgetting Schedule FA in the first ROR year, which can attract heavy penalties under the black money law. Missing the Form 40 deadline for 401(k) or IRA relief. Related reading NRI taxation in India: residency, TDS, DTAA (/insights/nri-taxation-india-guide) NRE vs NRO vs FCNR accounts (/insights/nre-vs-nro-vs-fcnr-accounts) Foreign assets in your tax return: Schedule FA (/insights/foreign-assets-schedule-fa-india) NRI property sale: TDS and repatriation (/insights/nri-property-sale-tds-repatriation) Global diversification for Indian investors (/insights/global-diversification-indian-investors) Frequently Asked Questions How many years can a returning NRI stay RNOR? Usually two to three tax years, depending on your history and return date. A long-term NRI generally meets the "non-resident in 9 of 10 years" test for the first two years back. The 729-day test can add a year if your earlier visits were short. Returning late in the tax year can also make the year of return a non-resident year. Is foreign salary taxable for an RNOR? Salary for work done and paid outside India, before you returned, is generally not taxable in India while you are RNOR. Salary for work done in India is Indian income and is taxable whatever your status. Foreign income received in India is also taxable, so keep foreign earnings abroad during RNOR years. Do I need to report foreign assets in my ITR as an RNOR? Schedule FA reporting of foreign assets applies to residents who are ordinarily resident. RNORs are excluded from the requirement to file a return solely because they hold foreign assets. Once you become ROR, you must report all foreign accounts, shares, retirement accounts and property in Schedule FA every year. Is NRE interest tax-free after I return? No. The NRE exemption depends on being a person resident outside India under FEMA, and you stop being one when you return to live in India. Interest from that date is taxable, even if you are RNOR for income tax. FCNR interest, by contrast, stays exempt while you remain RNOR. Will India tax my 401(k) or IRA? While you are RNOR, growth inside a foreign retirement account is generally outside Indian tax. Once you are ROR, filing Form 40 under section 158 lets India tax the income only when you withdraw, if the account is in the US, UK, Canada or Australia. The foreign country will also tax withdrawals under its own rules. Can I sell my US shares tax-free in India after returning? If you are RNOR and the gain accrues and is received outside India, India does not tax it. But US citizens and green-card holders remain liable to US tax, and other countries may tax recent former residents. Check both sides before selling. Does the 182-day rule apply in the year I return for good? Not fully. The relaxation to 182 days applies to citizens leaving for employment or coming on a visit. A person returning permanently is not visiting, so the 60-day test also applies: 60 days in the year plus 365 days in the previous four years makes you resident. Sources: Income-tax Act 2025, section 6 (Residence in India) (https://www.incometaxindia.gov.in/w/section-6-1) ; Income-tax Act 2025, section 5 (Scope of total income) (https://www.incometaxindia.gov.in/w/section-5-1) ; Income Tax Department: Form 40 FAQs (section 158) (https://www.incometaxindia.gov.in/documents/d/guest/form-40-faqs) ; Income-tax Act 2025, Schedule IV (https://www.incometaxindia.gov.in/w/schedule-iv-3) ; RBI Master Direction – Deposits and Accounts (https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=10198) ; Canara Bank NRI bulletin, August 2026 (https://www.canarabank.bank.in/documents/d/guest/nri-news-bulletin-august-2026) . Worked examples are Money n Wealth calculations. Planning your move back to India? The months before and after you land decide how much of your foreign wealth stays outside Indian tax. Talk to Money n Wealth (/contact) for a free portfolio review. This article is for general educational purposes only and does not constitute financial advice. Figures and examples are illustrative. Please consult a qualified financial adviser for guidance specific to your situation. Money n Wealth (Predics Fintech Services Pvt Ltd) is an AMFI-registered Mutual Fund Distributor (ARN-121995) and APMI-registered PMS Distributor (APRN07444); it is not a SEBI-registered investment adviser and may earn distribution commission on investments made through it.
