What is RNOR?
Resident but Not Ordinarily Resident is a transitional Indian tax status between Non-Resident and Resident. For returning NRIs, RNOR provides a 2-3 year window of Indian tax relief.
Eligibility rules
You're RNOR for a financial year if you're Indian tax resident (per 182-day or 60+365 test) AND meet at least one of:
- Non-Resident in 9 of 10 preceding years, OR
- Spent 729 days or less in India across 7 preceding years
For most NRIs abroad 5+ years, RNOR is automatic for first 2 years post-return, often 3rd year.
What's exempt under RNOR?
RNOR taxes only:
- Income earned/accrued in India
- Income received in India
- Income from business controlled or profession set up in India
Exempt from Indian tax under RNOR:
- Foreign salary earned while abroad (or for non-India work)
- Foreign rental income
- Foreign capital gains
- Foreign bank interest
- Foreign mutual fund / equity income
- Foreign retirement / pension distributions
Massive window for selling appreciated foreign assets, withdrawing 401(k), or receiving foreign income without Indian tax.
What's still taxable under RNOR?
- Indian salary / consulting
- Indian rental
- Indian interest on NRO/resident accounts (NRE still exempt under separate rule)
- Indian capital gains
- Indian dividends
- Indian business / professional income
How long does RNOR last?
Typically 2-3 financial years post-return.
Year 1 (FY of return): RNOR (NR in 9 of last 10 easily satisfied) Year 2 (FY+1): RNOR likely (still meet 729-day test for past 7 years) Year 3 (FY+2): RNOR possibly Year 4 (FY+3): ROR
Depends on exact prior years.
Worked example
Rohit moved back October 2024. FY of return: FY 2024-25.
Prior 10 years: Non-Resident every year. Prior 7 years: ~25 days/year for visits = 175 days total.
FY 2024-25 (year of return):
- In India from Oct 2024 = ~180 days + prior visits = meets resident test
- NR in 9 of 10 prior years → RNOR ✓
- ≤729 days in prior 7 → RNOR ✓
FY 2025-26:
- Full year in India = 365 days
- Prior 10 includes FY 2024-25 where RNOR (not NR) → 8 of 10 NR
- But prior 7 years: 175 + 180 = 355 days → still ≤ 729 → RNOR ✓
FY 2026-27:
- Prior 10: 7 of 10 NR — fails 9-of-10 test
- Prior 7: 25×7 + 180 + 365 = 720 days — still ≤ 729 → RNOR ✓ (barely)
FY 2027-28:
- Prior 7: > 729 → ROR
Rohit gets ~3 years RNOR.
How to use the RNOR window
- Sell appreciated foreign investments — no Indian capital gains tax
- Withdraw 401(k)/IRA — no Indian tax on foreign retirement
- Receive inheritance from abroad — no Indian tax
- Rental income from US property — no Indian tax (US still taxes)
- Foreign business income — no Indian tax if business not controlled from India
What about US tax?
RNOR is Indian concept. US tax on same foreign income depends on US status:
- Still US person → US worldwide taxation continues
- FTC: India RNOR doesn't tax foreign income, so India FTC isn't available for use against US tax
- DTAA: US has primary taxing right on foreign-source income for US persons
If surrendered GC before move:
- US non-resident, no worldwide obligation
- India RNOR doesn't tax foreign income either
- Net: no tax on foreign income during RNOR period!
Optimal exit path: surrender GC → RNOR window → both US and India tax-light.
Common RNOR mistakes
- Not claiming RNOR status in Indian ITR (defaulting to ROR)
- Wrong day count in 7-year lookback
- Missing 729-day threshold (just above)
- Declaring foreign income as taxable when RNOR exempts it
Practical advice
- File ITR-2 with RNOR claim — explicitly mark "RNOR"
- Maintain travel records 7+ years
- Document foreign-source income separately
- Time large foreign income recognition within RNOR
- Plan exit from RNOR — schedule major Indian income after RNOR ends
Strategy: extending RNOR
Some NRIs strategically minimize Indian days:
- 6 months/year (just under 182)
- Maintain US/UK/Singapore office for "Indian days < 730"
- Can stretch RNOR to 4-5 years
Trade-off: family stability, work logistics, lifestyle.
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.