Golden tax window for NRIs: What RNOR means and how to use it

Mint

21-05-2025

Picture this, you're a non-resident Indian (NRI), who's decided to return to India for good. Here's the good news, before you transition into a full-fledged resident for tax purposes, there exists a golden window that can help you save significantly on taxes.
It's called the RNOR status— resident but not ordinarily resident. During this phase, your foreign income isn't taxed in India, explained Ankur Choudhary, co-founder & CEO, Belong - NRI Savings & Investments.
Mint breaks down what RNOR means, how to claim it, and the smartest ways to manage your money during this tax-friendly phase.
Also read: Will my foreign salary be taxable in India?
What is RNOR?
RNOR is an intermediate tax status under India's income-tax, designed for individuals who return to India after a long stint abroad.
'The RNOR status acts as a buffer, a soft landing if you will, allowing returning NRIs to resettle without the burden of immediate global taxation," said Mukund Lahoty, co-founder, Turtle Financial Services.
Raj Ahuja of Turtle Finance said, 'RNOR bridges the gap between a non-resident and a full resident. While the individual is a resident for the purposes of stay in India, their global income, typically from foreign pensions, bank interest, or capital gains, is not taxed unless it is received or accrued in India or from a business controlled from India."
Also read: Here's how NRIs can save up to 18% GST on insurance premiums
Who qualifies as an RNOR?
There are two key conditions under which a returning Indian can qualify as an RNOR:
'You'll be an RNOR if you were a non-resident in nine out of the 10 preceding financial years, or if you've spent less than 729 days in India over the past seven years. If either condition is met, you're RNOR," explained Lahoty.
Take Mr Sharma, for instance—a data analyst who moved back to India in October 2024 after working in the UK for seven years. Over the past seven years, he visited India only during vacations, with a cumulative stay of just 680 days. While his stay in FY 2024–25 makes him a resident under Indian tax law, his lower cumulative stay qualifies him for RNOR status.
There's also an additional rule that applies to high-income individuals, flagged by CA Laxmi Ahirwar, director at P.R. Bhuta & Co.
'If your total income in India exceeds ₹15 lakh during the financial year, and you are not liable to pay tax in any other country, you may be deemed a resident, even if your physical presence in India is below the usual thresholds," she said.
'However, such individuals will still be classified as RNORs, not full residents. This rule is aimed at ultra-HNIs who shift base to low-tax jurisdictions."
Also read: How NRIs can use UPI for instant, no-fee transactions abroad
Consider the case of Mr Singh, an Indian citizen working in Dubai. In FY 2024–25, he spends only 50 days in India, which normally makes him a non-resident. However, he earns ₹18 lakh from rental income and dividends in India, and since the UAE does not levy income tax, he pays no tax there. Under the special clause, he is treated as a deemed resident due to his high Indian income and tax-free status abroad. But because he has been a non-resident for nine out of the previous 10 years, he still qualifies as an RNOR.
'This change came in with the Finance Act of 2020, mainly to address edge cases, where someone is mis-using the rule by living in India but still trying to claim NRI status to avoid tax on global income" said Choudhary.
How to claim RNOR status
To claim RNOR status, individuals must declare it in their income tax return under the appropriate subsection of Section 6(6) of the Income Tax Act.
Supporting documents are crucial: these include a detailed travel history for the past ten years, showing the number of days spent in India each year, along with copies of passport pages bearing entry and exit stamps.
Ahirwar stressed on the importance of accuracy here, noting that incorrect day counts can result in misclassification and unintended tax exposure.
Even individuals with dual residency may still be able to claim RNOR status and avail benefits under the Double Taxation Avoidance Agreement (DTAA).
According to Ahirwar, if a person is deemed a resident in India under Section 6(1A) but also meets residency rules abroad, tie-breaker provisions under the DTAA can be invoked to treat them as non-resident in India for treaty purposes.
'In such cases, obtaining a tax residency certificate (TRC) from the foreign jurisdiction becomes essential to secure treaty relief," she explained.
Tax benefits of RNOR
According to Ajay Vaswani, chartered accountant and NRI tax advisor, 'The RNOR window is like a golden hour for tax planning. You can repatriate income, sell foreign investments, and restructure your asset base, without having to pay Indian tax on foreign income."
During this window, it is also advisable to convert non-resident external (NRE) or foreign currency non-resident (FCNR) accounts to resident foreign currency (RFC) accounts.
'Interest earned in RFC accounts is tax-exempt for RNORs, unlike when you become an ordinary resident," Vaswani explained.
RNORs are also exempt from filing Schedule FA (foreign assets) and disclosures under the Black Money Act, reliefs not available to ordinary residents.
'In most cases, if the foreign income is not taxable in India, Schedule FA may not be required" said Vaswani.
RNORs can also access benefits under DTAA by using Form 67 to claim foreign tax credits. This is particularly useful if any part of your foreign income is taxed both abroad and in India due to remittance or source-based taxation.
Common mistakes to avoid
One of the most frequent pitfalls is miscounting the number of days spent in India. A small error can change your status from RNOR to resident and ordinarily resident (ROR), triggering taxation on your global income.
'A returning executive once ended up staying a few days extra and unknowingly lost RNOR benefits. The reassessment added a ₹12 lakh tax liability," recounts Vaswani.
RNORs are not required to disclose foreign assets or foreign income in Schedule FA of their Indian tax return. However, this comes with the responsibility of accurately tracking day counts in India.
As CA Pankaj R. Bhuta said, 'Even a few days can change your residential status."
Under Section 9 of the General Clauses Act, 1897, exclude the first day and include the last while calculating stay in India—errors here can wrongly shift RNORs to ROR status, making their global income taxable.
Another key rule: Once you become RNOR, you cannot operate NRE or FCNR accounts.
'These must be re-designated to RFC accounts," Bhuta said. He also reminded that RNORs should file ITR-2 or ITR-3, depending on income sources.
Clarifying a common confusion, Bhuta said, 'RNOR is a temporary tax status; Overseas Citizenship of India (OCI) is a permanent legal status."
An OCI holder can be an RNOR, but not all RNORs are OCI cardholders. Taxability for OCI holders depends on their physical presence in India, not the OCI card itself.
Form 67 must be filed in time, before the ITR filing deadline, to claim foreign tax credits. A delay can result in the denial of DTAA benefits, even if taxes were paid abroad.
Also, if you've been operating NRE or FCNR accounts, notify your bank upon acquiring RNOR status. These accounts should be re-designated to RFC status to remain compliant and continue earning tax-free interest.
Also read: This NRI couple in Melbourne is looking to move back for family and higher affordability
Final thoughts
Finally, CA Bhuta offers two key planning strategies for NRIs preparing to return to India.
'It is smart to plan your return towards the end of a financial year, say in February or March," he suggested. 'This timing could allow you to enjoy RNOR status for up to two additional tax years."
He also advised maintaining detailed records of foreign bank accounts and income sources before relocating.
'Keeping a clear audit trail simplifies tax filing and helps avoid complications during the RNOR phase," Bhuta added.
In short, the RNOR status can offer significant tax relief—but only when approached with careful planning, documentation, and a firm understanding of legal provisions.
Disclaimer: The examples of Mr Sharma and Mr Singh are hypothetical and intended for illustrative purposes only.