RNOR (Resident But Not Ordinarily Resident) is not very well know even in NRI circles. A few days back when I wrote a post about “status of NRE FD after return to India“ – I got few emails & comments that they have not heard about this.
Surprisingly even bankers don’t provide this information to NRI returning to India after the long stay. This increase tax liability of NRIs which he would have saved legally.
So I thought to cover this in detail including RNOR India tax & also added a calculator.
What is RNOR?
RNOR stands for Resident But Not Ordinarily Resident. It is a residential status given to certain people. Here are the conditions of determining whether a person is RNOR or not –
If the person is a resident Indian, he/she will be given the RNOR status if –
A resident Indian can be given an RNOR status if
- He/She has NOT been a resident in at least 2 out of the last 10 years.
OR
- He/She has been in India for a period of 729 days or less during the last 7 financial years
If the person is an NRI who has just returned to India, he/she will be given the RNOR status if –
- If the NRI has been outside of India for 9 out of the last 10 years, he can be an RNOR for 1 year.
- If the NRI has been in India for a period of 729 days or less during the last 7 financial years, he can be an RNOR for 3 years.
Let us make this simple with an example. Ms. Shweta left for the United States in 2001. She returned to India in June 30th, 2017. She will be considered as an RNOR for the financial year April 2017-March 2018.
What about 2018-2019?
She has been in India from June 30th, 2017 to March 31st 2019. That is a total of 639 days which is less than 729. Therefore she will be treated as an RNOR in the financial year 2018-19.
By March 31st, 2020, she would have been in India for 1005 days and therefore she will be treated as a resident Indian for the financial year 2019-2020.
This flowchart can help you to understand RNOR Status
RNOR Calculator
I don’t think after this explanation any calculator is required but if you still want you can download this simple calculator.
RNOR Tax Benefits
The government gives certain benefits to returning NRIs by making them as RNOR for some time. From a taxation perspective, an RNOR will have a similar status as that of an NRI.
So the person who is an RNOR will have to pay tax only on income received or accrued in India. The income earned abroad will not be taxed. So not ordinarily resident Indian income tax can be sustantially lower
Read – NRI returning to India
Why do NRIs get the RNOR Status?
This helps the NRIs to bring back their financial gains abroad without tax liability. The person with RNOR status does not have to pay tax on –
- Interest on FCNR deposits and NRE deposits if you convert that to RFC.
- Withdrawals from offshore retirement accounts
- Rent received abroad
- Capital gains made abroad
- Interest or dividend received from investments in deposits and securities abroad
Once the NRI becomes a Resident Indian from an RNOR, all income whether earned in India or abroad is taxable unless concessions and exemptions granted under the Double Taxation Avoidance Agreement, if any, between India and the previously residing country, are applicable.
Check your residency status every year so that you are aware of it and pay tax and file returns appropriately
If your status gets converted to Resident Indian, inform the bank so that your bank accounts (NRE and NRO) are designated as resident bank accounts. Your investment accounts should also be converted to resident accounts. The deposit accounts in NRE (but should be converted to resident) and FCNR accounts can be continued till maturity, transferred to Resident Foreign currency accounts or closed down.
“Any income received overseas becomes taxable based on Once your status changes to Resident, all your overseas income becomes taxable.
wiseNRI
Also, you have to intimate your bank about the changed residency status and convert the existing NRI specific accounts to resident rupee accounts.
How change in residential status impact investments
Common Questions asked on RNOR Status
Q.1 I was an NRI for the last 8 years and returned to India for good in October 2018. I have invested in a residential property in Hong Kong where I was residing earlier. I have rented it out and get rental income on it. Should I pay tax for it in India?
Ans. Since you have returned only in October 2018, you have stayed for less than two months in India which means you are an RNOR. The rental income will not be taxable in India for now.
Q.2 Anish went to United States to work in January 2018. For the financial year 2017-18, what status should he use to file the income tax returns?
Ans. Since Anish has stayed less than 182 days in US for the financial year – 2017-18, he should file the income tax returns as a Resident Indian for the financial year 2017-18.
Q.3 Do I have Indian citizenship when I have the status – not ordinarily resident Indian?
Ans. Yes, a person with RNOR status has an Indian passport and therefore is an Indian citizen.
Q.4 Can I get an RNOR status more than once?
Ans. You can get an RNOR status more than once provided you fulfill the conditions that give a person the RNOR status.
What is an RFC account?
An RFC account or Resident Foreign Currency account can be opened by a person who has the status – RNOR. Foreign funds can be brought to India in any currency you wish to and can be deposited in this account. NRE/NRO/FCNR savings accounts and fixed deposits can be converted to RFC accounts and RFC fixed deposits. Any interest that you earn in the RFC account while you have the RNOR status is tax-free in India.
It is useful as you need not to bear the effort and cost of currency conversion. It is easy to transfer these funds abroad if you move to a foreign location again.
I know RNOR is a complex topic – I have tried my best to simplify this. If you still have any questions on Resident but non ordinary resident Indian status – please add in the comment section. Please also share your experiences.
I think the interest income on NRE deposits is taxable for a person claiming NROR status. It is only the FCNR interest which is tax free during the NROR status
Hi RK,
For an NRI, interest earned on NRE deposits is exempt from tax in India. So long as you continue to be an NRI or a resident but not ordinarily resident if you convert that to RFC. (RFC rates are similar to FCNR) Interest income from FCNR is exempt for NRIs and RNOR
Check this https://wisenri.com/nre-fd-after-return-to-india/
Dear Shri Hemant,
First of all, kudos to you for making it crystal clear about RNOR taxability. You clearly say that NRE FD ineterst is also expmpted from income tax as long as RNOR status is there and NRE FD is not matured. Actually many Chartered accountant say that it is only FCNR FD interest is exempted and not NRE FD ineterst. Can you please let me know how do I explain to CA and show him that this is the claus that tells you that NRE FD interest is not taxable for RNOR ?
Thanks and regards,
Balkrishna Kapdi
Dear Shri Hemant, we did not see your reply to above point. Is RNOR need to pay tax on interest earned on NRE FD in INR. Kind regards. Harish
Hi Kruti & Bala,
You can convert NRE FD to RFC if you want tax free returns but interest will be much lower.
If a person returns back to India in Oct-18, he will be NRI in FY18-19 (less than 182 days stay in India). Does he have to inform the banks immediately or in April-19. If he informs the banks immediately, his NRE FDs will be converted to resident FDs and banks would start deducting TDS with immediate effect. Can he avoid TDS by banks in FY18-19?
Hi Shirish,
My understanding is if an NRI returns back to India permanently, he should inform the Bank “immediately upon return to India” and get the NRE FDs redesignated as resident FD. (there is no need to take premature withdrawal)
RBI has not defined the term “immediately upon the return of the account holder to India” but it should be taken in its normal sense which can mean a few days or at the most a few weeks after returning to India.
As far as taxability of the interest is concerned the tax exemption would continue only for the years that he was a “resident outside India” as per Foreign Exchange Management Act (Fema). For the FY 18-19, you are treated as NRI as your stay in India is for less than 182 days. Interest on NRE FDs would remain exempt for 18-19 financial year.
Informing bank about your permanent return is not a criteria for your taxability, taxability arises according to your residential status.
What about persons of Indian Origin having OCI card who have accepted foreign citizenship and desire to come and stay in India.
Dear Jagdish,
As an OCI when you return to India, you will automatically be RNOR. And you will not be liable to any taxes in India on your global income.
HI Hemant,
I can rate this a very good and rare article as no one else ever covered this topic. I have been in touch with my RMs from largest private banks of India, who are in regular touch with me for investments. I have queried them many a times about the same subject how our long time earnings from abroad and NRE deposits will be treated after I return to India. But never I received any info about RNOR or RFC. But above article is really self explanatory and will surely serve financial planning of those who return to India.
I am regular reader of your articles since 2010, I suppose.
Thanks Yogesh Ji – you made my day 🙂
Must share this with your friends…
Interesting as well as informative Article, Mr. Hemant.
Mr. Yogesh, you have mentioned a hard fact, RMs communicate NRIs for proposing the investments and when one ask any technical question they even do not know the NRI.
Hi Hemant,
Thank you for the insights. I claim RNOR status but my current foreign employer wants to retain me and continues to deposit salary during the period. I don’t resign but my employer gives the facility to work from India while the salary continues to be paid in foreign account.
In this case, will this income be taxable ? Should I declare this ?
Much appreciate your response.
Regards,
Arun
Hi Arun,
I will suggest you have a word with CA – DTAA.
My understanding is if it’s not taxed in a foreign country – it will be taxed in India.
I am currently an NRE for past 20 years. Now I am planning to return to India permanently. Can I get RNOR status after my return to India?
Dear Roshan,
Yes – you will get RNOR status.
Hi Hemant,
For some one who has been been in US from 2008 and planning to return June 2018, for year year April 2018 to March 2019 – RNOR, April 2019 to march 2020- RNOR and for April 2020 to March 2021 – Ordinary resident.
But in the above section, it talks about one can be RNOR for 3 year. How is that possible
Hi Rao,
If you see the RNOR flowchart above in the article, you will find after fulfilling basic conditions of resident if anyone unable to fulfill second condition then it will fall in RNOR. So if a NRI lives in india for 3 completed years, then second condition will get fulfilled and he becomes resident.
In your case if you come in june 2018, then your 3yrs will complete in 2021-22 FY. You will remain RNOR till march 2021
sir it’s about rnor status. bankers are asking the section number in the tax rules where it is mentioned about rnor status and its benefits.they are not ready to accept the fact instead they insist to convert accounts to resident and pay tax from that date even though you have rnor status. please help
Hi Hari
Section 6 of the Incometax Act deals with residential status and conditions of RNOR status fall in the same section.
As per FEMA, if you permanently come to india, you are designated as resident from the first year and banks will redesignate your account.
You can hold NRE and FCNR deposit till maturity but you can avail interest tax exemption on FCNR interest till you have RNOR status.
Why fcnr deposits different from nre fd in rupees. As per rule both are repatriable .fcnr in designated currency nre fd in rupees but backed by a foreign currency.that’s why it’s repatriable. Correct me if I am wrong.so when you consider tax exemption for FCNR deposits under rnor it should be applicable to nre fd also. Need an expert opinion
Hi Abrahm,
As mentioned above in article, interest on FCNR deposit maturity and your status is RNOR. But in such status you can’t renew them. So there is parity in terms of taxation of interest in RNOR status.
In case of NRE FD – you can convert them to RFC if you want.
If NRI rturn to india before completion of 5 years what woudbe status of NRE accounts .
Hi Rakesh,
You can easily check your status with the help of chart given above. If your status is RNOR, you can enjoy tax-free interest on FCRN. Status of NRE account changes once you become resident.
Dear Mr. Hemanth,
Very nice articles on RNOR and RFC. The banks were not aware of RNOR status.
I returned back for good on 1/10/2018 after staying abroad for more than 15 years. I understand that I will be RNOR. I will be converting my NRE & NRO Savings account to Resident accounts this month. I have a few NRE FD’s maturing next month. If I transfer the proceeds to the converted resident account on maturity do I have to file and pay tax on the interest component as per my tax slab. Please advise. I feel the bank will deduct TDS before crediting proceeds.
Other suggestion was to transfer the proceeds to RFC account which will be tax exempted. But then there will be exchange rate convertion loss due to buying and selling in usd since I need the funds in rupees.
Please advise.
Thanks
Madhu
I was living in india till 1st march 2015 and left for employment to dubai on 1st march 2015 and worked for a year. After that i joined in 2016 another company in dubai and worked till june 2018 and left due to ill health and continued living with my son as dependent who works in dubai.. I was in india during fy 2018 19 less than 182 days. Our whole family is living in dubai. What is my residential status for income tax return filing.
Hi Mahendra,
I think your residential status in FY18-19 is NRI as you are not in india in previous year 18-19 for 182 days or more or
365days or more in 4 years immediately preceding the previous year 18-19 and at least 60 days in previous year 18-19
Dear Hemant, it is clear that the FDs may not attract TDS during the RNOR status. However, if this person is employed in India during these 2or3 years as RNOR, will he be liable for taxes for the amount earned via salary from the employer only. Or while filing returns will he have to mention the interest earned on the FDs and pay tax for it. My question is applicable, only for during the RNOR period.
Hi Sanjay,
Income received or accrued in india is taxable even if you have RNOR status. If you are receiving salary for services rendered in india, your salary is taxable You have to mention FD interest while filing return and if TDS is deducted on your FDs, you can claim it in your return.
Hello There,
I am an Australian citizen and currently live in India. Would I need to pay taxes if I am generating no income? Is there a limit to the number of days I can stay in India if I am not drawing in a salary from an entity within India?
Thanks so much!
Sp
Hi SP,
As you are a foreign national and earning no income in india, there is no question of tax in india. Staying in india depends upon your visa permits.
Very educative .I returned aug 2018 , after 18 yrs in Gulf. How do I clame my RNOR status
Hi R.S. Sastry,
You can claim RNOR status in FY 18-19 while filing your income tax return in india
What is the benefit as RNOR a/c and for how many years the benefit is availed if I have returned in Aug 2018 after 18 yrs in Gulf
Hi R.S.
You can avail benefits of RNOR for maximum 3yrs. In FY18-19,19-20, 20-21
I was a NRI for the last 21years. I have some NRE FD s. Recently I mean returned back to india in ladt June. In RNOR status Interest earned on NRE FD s taxable during RNOR status
For a returning NRI , with RNOR status, you have mentioned that interest on NRE FD is free of tax till deposit maturity. Is it true as I had been informed through all other sources that interest earned on NRE a FD in Indian Rupees is taxable from the day I return back to India irrespective of RNOR status
Hi Jaweed,
If these FDs are converted to RFC – interest can be tax-free but rates & structure of the product is totally different.
In case of PIO having regular business in USA starts a back office in India and stays for more than 182 days in India, then upto which period he will be R N O R?
Will interest earned on his funds in NRE/FCNR account will become taxable in India? Since he has also set up business in India, his status immediately becomes resident under FEMA?
Hi R.K.,
As a NRI, you are running a back office in india and earning in india from that backoffice. Your income from such office is taxable in india even if you hav RNOR status. You can avail RNOR status upto 3 yrs. Only interest from FCNR deposit is exempt from tax till you are holding RNOR status.
How does one get/claim RNOR status ie. what online or paper form should i fill to claim this status and where can i find them?
Hi Ashutosh,
This is a residential status for income tax purpose.You can hold this status only while filing your income tax return
I am RNOR. I have FD in INR in NRE account. Is interest in these FD’s taxable?I also earn consultancy income from one client from abroad and being paid in USD in my NRE account. Do I have tax liability on this income?
Hi Manish,
Whatever your status is any income received in India will be taxed in India so file tax.
Dear Hemant,
Thank you for this very useful information. Can you please tell where is the claus/rule that say for RNOR interest on NRE FD is not taxable ? Because some CAs even do not know and say that NRE FD ineterst is taxable for RNOR status.
Appreciate your reply.
Thanking you,
Balkrishna Kapdi
Dear Hemant jee, Brilliant work by you. I returned to India on 4 February 2016 after working overseas for 15 years. I filed IT return for FY 2016-17 and 2017-18 as Resident Indian and claimed exemption under RNOR providions. I worked outside India for about 150 days in total till end of FY 2018-19 since my return to India. Please advise on applicability of RNOR exemption for FY 2018-19 in my case.
Hi Prakash,
Yes, you are RNOR for FY18-19
Where is the rule written that during RNOR status, interest on NRE FD is exempted from tax ? Because even many CA say that only FCNR interest is exmpted and not NRE FD ineterst.
I came in india on 1st March 2019. How to calculate RNOR status
Hi Rohan,
You can find your status with the help of the diagram mentioned above in the article
Dear Sir,
I was NRI from 12-10-1981 to 16-5-2017. How many years I can avail RNOR status?
Regards,
Omkar
Hi. Omkara,
You can avail RNOR status only till FY 2018-19.
Good information on RNOR. BUT there is disconnect on redesignation in reference to tax free interest earned till maturity
During RNOR period of the person goes away to abroad for say 4 months then how will you calculate number of days leading to 729?
I have returned to india on 4th april anf my wife on 15th march.. i have nre fd account.. what happens to the interest on them. I have been resoding oitside india for past 13 years
Hi. Jainendra,
You must check.
https://wisenri.com/nre-fd-after-return-to-india/
Good Morning.,
Can you reconfirm that for a person on RNOR status the NRE deposits interest income is not taxable until maturity?
I am on RNOR status for AY 2019-2020 and preparing my IT Returns now. My auditor is now saying NRE Deposit interest is taxable during RNOR status.
But I find logic in your assessment, the Banks too, have not deducted TDS on NRE Interests. In addition for practical purposes, NRE Deposit and FCNR Deposits are the same.
Is there any case study where the IT Department has accepted or rejected our contention that NRE deposit Interest during RNOR is not taxable?
Thanks a lot.
Hi Sundar,
For this purpose, one needs to determine residential status under FEMA. If a person is NRI under FEMA, only then his interest on NRE account will be exempt from income tax.
In all probabilities, an RNOR will also be a “resident” under FEMA. If this is the fact, his interest will be taxable.
i have been an nri for 20 years till jan 2017.. wil i be rnor this FY.?
Hi. Prakash,
No, you will not be eligible for RNOR for FY 2018-19 because you have stayed in India for 800 days approx > 729 days till March 31st, 2019.
Kindly clarify me.
If a Nri deposit opened on 01 7.17 for 10yrs and he became resident on 01.4.2019 what will be deposit status? Whether it can be continued till ten yrs. If can be continued means what about the ineterst. Is it taxable?
Hi. Mahe,
You must check.
https://wisenri.com/nre-fd-after-return-to-india/#comments
How to convert domestic deposit to nre deposit?
Hi. Mahendran,
You cannot convert domestic/saving deposits into NRE Deposits but you can convert it into NRO deposits.
For this, you need to consult with your banker or you need to intimate them regarding your NRI status.
Hello Mr. Beniwal,
Thanks for sharing such useful information, it really helps. I would like to ask my query. I have been out of India from SEP 2007 to may 2018. I returned in may 2018 with another offer in hand, however by the time visa & other formalities were completed, it was Feb. 2019. So I am currently out of India. I don’t know what would be my status for financial year 2018-19? Also, since I was supposed to go back out of India, I did not inform bank as there was no plan to return. However, now I am planning to return in August 2019 permanently. Please let me know what should I consider while filing return for year 2018-19? Also, in this case when does my RNOR status starts & ends?
Hi. Mahesh,
As you have stayed less than 182 days in FY 2018-19 that means you have to file ITR as Resident Indian.
For RNOR status please refer Example in the above Article.
I am confused about my Residency status for tax purposes. I moved to Australia on 25 Aug 2018 and found a job there. This means I have stayed for less that 182 days in India and can claim India tax return for FY 2018-19. Is my calculation correct ? I have always stayed in India before moving to Australia in Aug 2018. Would I be correct in assuming that the 60 day rule(+365 days in previous 4 years) does not apply in my case ?
Hi. Cyril,
Yes, You are correct.
A person who was nri for more than 10 years happens to be in india for approx 250 days. So his status changes in that fy to rnor .right? Now if he goes out of the country again for job for more than 185 days .will he become nri again? How is tax treated?
Thanks for writing about RNOR. Something new that not many people are aware of.
Thanks Rajesh 🙂
I am finally returning India after 33yrs continuous stay in Saudi Arabia in sept 3019…Does my NRE Fixed deposits and its interest in Indian rupees are free from any income tax in india till my status is RNOR..pls clarify in detail
Dear Dr Masood,
You can convert those FDs to RFC or tax will be applied.
I am a seaman, working on foreign ships.My stay in India has always been less than 182 days. However if the previous 4 years is counted, my stay in India is more than 365 days.
Hi Kevin,
What’s your question?
I was out of India for more than 20 years and came back permanently in January 2019.when I need to file my return and does my NRE F D will come in perview of RNOR. Status. When I need to inform the bank for redgine my nro and nre account. Please clarify
Hi Janak,
According to FEMA one becomes resident as soon as he returns but for tax purpose, you were NRI in 2018-19 – you can inform your bankers now.
I could not complete my NRI days, in last financial year. I have been NRI since 2003. Kindly advise, what is RNOR?
Dear Sir,
I have been an NRI since Sept 1982 and returned to India on October 2016. During these years I have come to India for an average duration of 45 days per year. From October 2017 onwards I went abroad and will be working there until October 2019, when I plan to setttle in India Permanently. Kindly advise what will be the status of my existing NRE FDs and NRE SB account after October 2019. Can I claim RNOR status? Can I keep the NRE FDs until the maturity period ? How can I save on taxes after October 2019. Thanks for an urgent reply.
Hi Ajith,
I will suggest you get in touch with a CA.
I AM A SEAFARER HAVING COMPLETED THE OBLIGATION OF SAILING ONBOARD FOREIGN GOING SHIPS FOR MORE THAN 182 DAYS IN THIS FINANCIAL YEAR. WHAT IS MY RESIDENTIAL STATUS . (I COULDN’T COMPLETE MY NRI TIME LAST YEAR AND ENDED UP PAYING INCOME TAX FOR THE LAST FINANCIAL YEAR)
For Ronr if it’s said less than 729 in the last 7 financial year. Can you give an example?
Hello – this is regarding RNOR status. I left India in Feb, 2008 and got back in Jan, 2017. I lived in Middle East (ME), Africa and US during this period. I have some deferred benefits with the company both for period in ME and Africa (Pension, Profit Sharing, etc.) as well as in US (401K). I returned back to India in Jan, 2017 with the same company and am leaving the company next month (Aug, 2019). Am I eligible for RNOR status?