RNOR Status NRI – Today many NRI are planning to shift to India. They will be changing their investor status from NRI to a resident and they are worried about huge tax applicable on investment options for a normal resident.
Recently I got an email from Mr.Shiva. Mr.Shiva is NRI and living in Singapore since 2001. He is planning to return to India permanently and bringing all his saving from overseas to India. It will be his retirement saving and he is looking for safe investment option with a reasonable return and tax saving benefits in India. He is planning to invest in fixed deposit but he wants to enjoy tax benefit. As he will be ordinary resident he needs to pay Tax on FD. However, RNOR status can help him to save tax up to 3 Years on FCNR deposit. So, let’s take a look at RNOR status for NRI and how it can help to save tax.
What is RNOR Status?
RNOR is Resident but Non Ordinary Resident status. It is a transitional state between becoming resident of India from NRI. The special status of RNOR is given to individual if he/she satisfy following conditions.
- If you are holding NRI status for 9 out of 10 previous years.
- If you have spent less than 729 days in India in past 7 years.
Note – Above conditions are either or conditions. This means any one condition should be satisfied in order to become RNOR.
What are the Tax benefits of RNOR status?
RNOR is special status given to NRI returning to India. RNOR in India can continue to enjoy tax benefit like NRI. RNOR has to pay taxes only on the income generated from India. They will continue to enjoy tax benefit on Foreign Income. In the other words “Income which has no relation with India” will be tax free.
This includes –
- Any interest or dividends from foreign securities
- Any capital gains from the sale of foreign assets including property
- Any withdrawals made from foreign retirement funds
- Interest earned on Foreign Currency Non Resident (FCNR) bank account or deposit held in India (until maturity).
- Interest on foreign currency accounts held in India.
Recommended Post – Financial Checklist for NRI before leaving India
How long can I be RNOR?
Answer of this question depends on the fulfillment of conditions for RNOR. If you fulfilled first condition for RNOR means if you are holding NRI status for 9 out of 10 previous years you will get RNOR for 1 year. Secondly, if you have spent less than 729 days in India in past 7 years you can get RNOR status for 2nd and 3rd Year. Maximum you can get RNOR status for 3 years.
Mr.Shiva is staying in Singapore for last 15 years. He will be returning to India in June 2016. He is not clear where to apply for RNOR status and how long he can be RNOR?
As Mr.Shiva is returning back to India in FY 2016-17 and both condition for RNOR is getting fulfilled he will be RNOR for 3 years and he can enjoy tax benefit for NRI up to FY 2018-19. After that, he will be an ordinary resident.
Mr.Shiva need not to contact to any authority to avail RNOR status. The RNOR status will be applicable to a person based on his or her length of stay outside India.
Important points Investor status from NRI to a resident
- Once you become an ordinary resident you need to intimate bank. Now you cannot operate the NRO/NRE/ FCNR accounts.
- You need to open ordinary saving bank resident rupee account.
- You need to open a new Demat account with ordinary status for making investment in stock market.
- Trading account with NRI status has to be closed.
- A new KYC needs to be filled up mentioning new address and details. This is required for Mutual Fund Investments.
- If you are not holding any PAN card, you need to apply for new PAN card.
Hope RNOR tax benefit and other details that are given above will help all NRI friends returning back to India?
If you have any query related to NRI taxation or any other problem related to NRI feel free to post in the comment section.
A special thanks to Mr.Shiva who inspired me to write this Post.