Returning to India? Use RNOR to save on taxes
You may be familiar with tax residency as an NRI. It determines how you will be taxed on your global income - salary, capital gains, dividends, interest and rent. While some countries like the UAE have no income tax, in most countries your global income becomes taxable as soon as you become a resident of that nation. However it is also a common practice for nations to give ‘transition periods’ or cooling of periods to returning non-residents. During this period, your global income is not taxed, only domestic income is taxed.
How to qualify for RNOR
RNOR or Resident but not ordinarily resident is a tax status given by India to returning NRIs. To qualify for it you must either have been an NRI for 9 out of the preceding financial 10 years or you must have lived in India for 729 days or less in the preceding 7 financial years. For most people RNOR lasts for 1 year but some clever planning of stays can stretch it to 2 or even 3 years.
Benefits of RNOR
While you are an RNOR, you don’t pay tax on your overseas income if you don’t repatriate it (bring it back to India) in that same year. You also don’t have to disclose your overseas income and assets. Hence you can use RNOR to strategically book your capital gains or losses on investments overseas and reinvest them in Indian assets or assets that are tax-efficient in India.
What to watch out for
To claim RNOR status you must effectively plan your days in India. Consult a CA before coming back to India on how to maximize your RNOR years. Also plan your investments strategically to minimize your tax bill.
Frequently Asked Questions About RNOR (Resident But Not Ordinarily Resident) Status
What is RNOR and how does it differ from regular resident tax status?
RNOR is a transitional tax category where returning NRIs are treated as residents for some purposes but are not taxed on global income, unlike normal residents who face tax on worldwide income.
How do I qualify for RNOR status in India?
You qualify if you were non-resident for at least 9 of the previous 10 financial years, or if you stayed in India for 729 days or less over the preceding 7 financial years.
How long does RNOR status typically last?
For most returning NRIs RNOR effectively lasts about 1 year, but careful planning of Indian stay days can extend this to 2 or even 3 years.
What are the main tax benefits of RNOR status?
During RNOR years, overseas income that is not brought into India is not taxed in India, and you generally are not required to disclose foreign income and assets there.
Can I strategically book capital gains while on RNOR status?
Yes, RNOR years are often used to realize gains or losses on overseas portfolios without Indian tax, then reposition capital into Indian or other tax-efficient assets.
What happens if I repatriate foreign income to India while on RNOR?
Once foreign income is brought into India in the same financial year, it can become taxable, so many NRORs keep foreign earnings abroad until timing is optimal.
Do I have to disclose overseas assets while on RNOR status?
Generally, RNORs are not required to disclose foreign assets under Indian foreign asset reporting, which is otherwise applicable for ordinary residents with global holdings.
How important is day-count planning for maximizing RNOR benefits?
Precise tracking of days in India is critical, because exceeding thresholds can terminate RNOR status earlier than intended and trigger full global taxation.
What investment strategy should I follow during my RNOR years?
Typical strategies include booking foreign gains, rebalancing currency exposure, planning future remittances, and aligning portfolios with long-term residency and tax expectations.
When should I start planning for RNOR status before returning to India?
Planning is best started several months before return so travel, residence days, portfolio actions and documentation can be aligned with RNOR eligibility and tax goals.
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