Most people planning a move back to India think about schools, housing and notice periods. Tax residency is dealt with after landing, usually when someone asks whether the foreign salary needs declaring. By then several decisions have already been made, and some of them cannot be unmade.
A returning NRI usually qualifies as Resident but Not Ordinarily Resident for two to three financial years, during which foreign income that accrues and is received outside India generally stays outside the Indian tax net. The status is not automatic and is assessed each financial year, so the date you return and where your income is credited both matter.
Planning a move back to India? WhatsApp us your expected return date and we will map what your residency position looks like.
Quick Summary — The Three Statuses
| Status | What is taxed in India |
| Non-Resident | India-sourced income only |
| Resident but Not Ordinarily Resident | India-sourced income; most foreign income stays out |
| Resident and Ordinarily Resident | Worldwide income, with foreign asset reporting |
Step One: Are You Resident At All?
Residency under Section 6 comes first, and it is a day count, not an intention.
You are resident for a financial year if you were in India for 182 days or more in that year. You are also resident if you were in India for 60 days or more in that year and 365 days or more across the four preceding years.
Note the financial year runs April to March. Someone returning in February crosses far fewer days in that year than someone returning in May, and that difference alone can change which year your global income becomes taxable.
Step Two: Ordinarily Resident, or Not?
Once resident, a second test decides which kind. Under Section 6(6) you are Not Ordinarily Resident if either of these holds:
You were a non-resident in nine out of the ten financial years preceding the current one, or you were physically in India for 729 days or less across the seven preceding financial years.
For someone who has genuinely lived abroad for a decade, both are usually satisfied — which is why the status typically runs for two to three years after returning, then ends.
What RNOR Actually Protects
Foreign income that accrues and is received outside India is generally not taxed in India while you are RNOR. That covers foreign salary, rent on an overseas property, foreign dividends and capital gains, and interest on foreign bank accounts.
Income earned, received or arising in India remains taxable throughout. RNOR is not a general exemption — it is a shield over foreign-source income, and it holds only while the income genuinely stays foreign.
That last point is where people lose it. Income routed into an Indian account, or effectively controlled from India, does not sit as comfortably outside the net as income left where it arose.
Your Bank Accounts Change
This is the part most returning NRIs handle late.
NRE accounts are for non-residents. On return they need to be converted — to a resident account, or to a Resident Foreign Currency account, which allows the balance to remain in foreign currency and the interest to stay exempt during the RNOR period.
FCNR deposits generally continue to maturity, with the interest exemption preserved.
The mistake is leaving NRE accounts running unchanged after residency has changed. The status of the account should match the status of the person holding it.
What to Settle Before You Land
Your return date, deliberately. Landing in one financial year rather than another can change the year in which global income becomes taxable, and the difference is frequently large.
Where income is credited. Foreign salary or investment income paid into an Indian account is a different conversation from the same income left abroad.
Foreign retirement accounts. Withdrawals, rollovers and restructuring are usually easier during the RNOR window than after it. Take advice before moving anything.
Documentation. Keep travel records, entry and exit dates, and foreign tax filings. Residency is proved by day count, and day count is proved by records.
When RNOR Ends
Once you no longer satisfy either Section 6(6) condition, you become Resident and Ordinarily Resident. Global income becomes taxable in India, and foreign assets must be reported in Schedule FA of your return.
That transition is predictable. It should be planned for during the RNOR years, not discovered in the year it happens.
Frequently Asked Questions
Is RNOR automatic when I return?
No. It is assessed each financial year against the Section 6 and 6(6) conditions, and must be determined afresh every year.
How long does RNOR usually last?
Commonly two to three financial years, depending on how long you were abroad and your day count in the preceding years.
Is my foreign salary taxable during RNOR?
Foreign income accruing and received outside India is generally outside the Indian net. Where it is received in India or controlled from India, the position is different.
Do I have to close my NRE account?
It has to be converted once you are resident. A Resident Foreign Currency account is the usual route where you want to keep the balance in foreign currency.
Do I still file an Indian return as RNOR?
Yes, where you have taxable Indian income or otherwise meet the filing conditions. RNOR affects what is taxed, not whether you file.
Does RNOR apply to a returning NRI’s spouse too?
Residency is assessed individually. Each person’s day count and history is tested separately.
References
- Income-tax Act, 1961 — Section 6, residential status, and Section 6(6), not ordinarily resident
- Finance Act, 2020 — amendments to residency conditions and deemed residency
- Foreign Exchange Management Act, 1999 — conversion of NRE and FCNR accounts on change of residential status
- Income-tax Act, 1961 — Schedule FA reporting requirements
⚠️ Residency conditions, deemed-residency rules and thresholds change through amendment, and each person’s position turns on their own day count and income sources. Confirm your specific position with an advisor before making decisions about your return date or your accounts.
Related Reading: NRI Setting Up a Business in India: Registration Guide · NRI Property Sale and TDS Under Section 195 · ITR Due Date AY 2026-27
Call or WhatsApp: +91 7448200422 Email: info@taxkitab.com See our NRI Services, or get in touch before you finalise a return date.
