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.
Also Read – Health Insurance Plans for NRI in India
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.
Also Read – How NRI can transfer money abroad from property sale?
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.
Example
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.
Avani
Hi I am Indian recently acquired British citizen. I am planning to return to India in my 2016-17 and will join Indian company working under OCI visa (other citizen of India).
My questions
A) what are my tax implications for my salary / any earning in India?
B) what are my best option to invest money ?
Raviraj Parekh
Dear Avani,
OCI can hold RNOR staus if they fulfill conditions mention in the post.Answer of your questions are given below.
(1) Any income earned by you in India will be taxed as per Income Tax rule.
(2) Best Investment option depends upon your risk appetite.However, I will advice you to invest in Mutual fund via SIP route.
Anil
Great Post. Two question :
During my stay abroad , funds remitted in to NRE account (held in InR) and some of them converted to fixed deposits .
-Can you advise what happens from taxation perspective to funds , deposits in NRE account ?
-do I have to go and inform bank to change to normal resident account ?
Raviraj Parekh
RNOR is treated at par with NRIs. RNOR needs to pay tax only on his Indian Income.As your fixed deposit is earning money in INR tax is applicable. No tax is applicable to NRE fund held in Foreign currency till you remain RNOR.
Gunasekaran Babu
Hi,
I was worked in Qatar from March 2015 to August 2016 visit visa, 3 Months once i came back to India and 15 to 20 days i will be stayed in India. Could you please tell me I want to File income tax or not for AY 2015-16.
Email id: gunababu@gmail.com
Mobile: 9840880343
Thank you,
Regards,
Gunasekaran.B
Raviraj Parekh
Dear Babu,
If you have not earned any income in India you need not to file Income tax.If your income in India is exceeding 2.5 Lac (Taxable) you need to file Income Tax Return.
Rakesh
Good afternoon sir.. One of our friend is a Engineer in ship and sailing other than Indian waters…he has been maintaining NRE status for past 9 years for which he had filed Nil income for these years.. How is RNOR is applicable to him… Whether his foreign income will be treated tax free for the tenth year also
Raviraj Parekh
Yes RNOR status is applicable to him and he can avail benefit up to 3 years.
Arun Kumar
I have both FCNR deposits in FC, and NRE deposits in INR, and returned to india this year after 15 continuous years as NRI. I have PAN and have filed returns in India for past 15 years for income in India. Do I get tax exemption on NRE deposits in INR till maturity as I have RNOR status?
Raviraj Parekh
Yes Mr.Arun Kumar you can avail benefit of RNOR status.
anil
RNOR status does NOT exempt the interest on NRE deposits in Indian Rupees.
The interest earned on NRE deposits in Indian Rupees is taxable at normal rates applicable.
Mr. Parekh, can you please confirm whether my above understanding is correct?
Raviraj Parekh
Yes, tax is exempted on interest earned on Foreign Currency Non Resident (FCNR) bank account and/or deposit held in India (until maturity). It is not applicable to income earned in India in INR.
Rajanna K V
Dear Sirs, Mr.Anil/Mr Parekh,
Most of NRIs have their NRE FDs in INR only & I am also one such person have many NRE FDs which will mature after 5 years of my return to India. Like others I will also get my RNOR status for two years as I am an NRI for 14 years. As explained by you above interest from NRE FDs will be taxable even during RNOR status. Here I would like to add that, when in all websites are saying RNOR status is almost equal to NRI status then this exemption also should be there. Moreover as you explained once a person becomes resident interest earned from NRE FDs will be taxable because it is earned in INR but, when a person is NRI at that time also NRE FDs are maintained in INR only & the interest is exempted from Tax. Request you to think more on this matter & help us to get tax exemption for NRE FDs atleast upto RNOR status by making any provision in available IT rules/FEMA rules.
Rgds
Rajanna
Sameer
I have been sailing on fg vessels and had nri status maintained for last 9 years. Will i be elgible for rnor status even if i have only filed returns since 2014
Raviraj Parekh
Yes Sameer, You are eligible for RNOR status.
Uttam Kumar
I have a basic query if you can help me. My bro in this FY has not completed 183/- outside on foreign sea waters, earlier 10 years he has been NRI, so for this FY when we file the returns, should we file as Resident and pay taxes for $ he got on ship abroad or just continue filing as NRI and no taxes to be paid. Also do we have NROR open for this year when 183 days not completed?
Raviraj Parekh
No need to file any tax for dollar earned by him outside.
haresh
RNOR status individual has no income in India. Should he has to file Nil IT returns.
I am asking this question as for some reasons I am in India for longer period i.e more than 182 days so my status changed this year but next financial year I am going to be abroad having NRI status.
Pl guide me
Raviraj Parekh
Dear Haresh,
No need to file income tax return if you have NIL income in India
varma
Please tell Me the basic rates for RNOR
Antony Chacko
Hello Sir, is it possible RNOR status person can invest in PPF. If not possible how one can cancel the RNOR status before three years to invest PPF and other post office investment plans and goverment bonds.
Raviraj Parekh
Very good question.If you are planing to stay in India as resident you can invest in PPF.
Rup
Hi,
I am planning to return to india after 16 years of staying abroad. I can continue my work online for which payment will be coming from abroad. Will that be counted for Tax return? This income will be deposited in my NRE savings account.
Raviraj Parekh
Dear Rup,
If you are earning income within India it will be taxable.
Bala Krishnan
Dear Sir,
After spending 33 years abroad continuously I cam back t India on Oct 3rd, 2016.
Can I get tax exemption on my NRE FD account interest on RNOR category?
Do I have to inform banks to convert my status into RNOR ?
Awaiting your reply
Best regards
Baka Krishnan
Raviraj Parekh
Yes you can get tax exemption as long as you hold RNOR status.that means up to 3 years from the day you hold RNOR status.You need not to inform about your RNOR status to bank.
Lukose
Mr. Balakrishnan is asking about NRE deposit, and as clarified by Mr. Raviraj in previous posts, it attracts tax as soon as you inform the bank about your resident status. Only foreign currency deposits are exempt from tax during RNOR period.
V T Rajan
Dear Raviraj
I am perhaps repeating a question!! Yet, will be obliged if you can answer me. Because, it is so confusing! I have returned to India after 16 years as an NRI. I am sure that I have an RNOR status (as I fulfill all the conditions). My question/doubt is:
Is my Interest Income on NRE Term deposits taxable in India as I enjoy an RNOR status? Because the interest is accruing out of the NRE deposits, which is a foreign exchange that was remitted as an NRI.
Rgds
Rajan
Raviraj Parekh
Dear Rajan,
Your income earned on NRE shall be taxable in India.You can refer to Income tax Tutorial giving further information on this.
http://www.incometaxindia.gov.in/Tutorials/9.%20Non-resident.pdf
Anil Mehta
Sir, I have stayed out of India from year 1997 and planning to return back to India on June 30, 2017. I have few doubts
1. Money in NRO Account will be taxable from day one as it is now also and account will get converted into Resident Account.
2. NRE Deposits – I have deposits maturing up to year 2022. Will I have to pay tax on interest income on these deposits from year ending March 31, 2018 or do I have to pay tax on maturity in 2022. If I convert this account to RFC Account what is the benefit.
3. Interest on NRE Account – After coming to India on June 30, 2017 if I go on Visit Visa and stay out of India for 3 months can I claim NRE Status for year ending 31 March 2018 so I dont pay tax for that year and pay only from year ending 31 March 2019.
4. FCNR Account – I have various FCNR deposits maturing in year 2018, 2019, 2021 and 2022. If I return back on June 30 2017 do I have to pay tax on interest income on FCNR Deposits from year ending 31 March 2018 or the interest income is exempt till what year Sir.
Thank you for your excellent blog and helping NRI’s
Regards
Anil Mehta
Raviraj Parekh
Dear Anil,
Answers of your queries are given below.
1. Money in NRO Account will be taxable from day one as it is now also and account will get converted into Resident Account. – Yes it is taxable from day one.
2. NRE Deposits – I have deposits maturing up to year 2022. Will I have to pay tax on interest income on these deposits from year ending March 31, 2018 or do I have to pay tax on maturity in 2022. If I convert this account to RFC Account what is the benefit. – Yes you need to pay tax.
3. Interest on NRE Account – After coming to India on June 30, 2017 if I go on Visit Visa and stay out of India for 3 months can I claim NRE Status for year ending 31 March 2018 so I dont pay tax for that year and pay only from year ending 31 March 2019. – Any income you earned in India you need to pay tax.
4. FCNR Account – I have various FCNR deposits maturing in year 2018, 2019, 2021 and 2022. If I return back on June 30 2017 do I have to pay tax on interest income on FCNR Deposits from year ending 31 March 2018 or the interest income is exempt till what year Sir. – Not taxable till you hold RNOR status.
S,Varatharajan
I have worked abroad from 2004 till now around 13 years. I am planning to settle in India. I have NRI deposit. can I avail RNOR status for 3 years.
In case if I move to another country and what will be implications.
Raviraj Parekh
You can avail RNOR status.If you move to other country you will hold NRI status.
Gagan
hi,
I have been a NRI for approx 13 years and haven’t been filling IT returns.
I came to India this march & for some unforeseen circumstances are forcing me to stay here and i wont be going back.
In march i have opened another NRE account where i have booked a NRE FD to take advantage of tax free status. (Interest paid on maturity)
Kindly clarify whether this FD will have tax exemption being NRE FD or i may have to pay Tax once i declare my status to bank that i am not going back.
I fullfill both condition to be RNOR for 3 years.
How do i avail benefit. Bank doesnt have much knowledge on this.
Raviraj Parekh
If you are on RNOR status and FD is NRE in foreign currency (From income from abroad) you can avail tax benefit on this FD.
Bala Krishnan
Dear Sir,
I am NRI who returned to India on 3rd October 2016 after 34 Years of continuous service abroad. As per your Blog chart I am qualified to be a NROR.
I have few NRE FDs maturing in 2017.
1) Do I have to inform the banks about my present status ?
2) Can I avail the tax benefits on my NRI FDs in Indian Rupees and if so how long ?
3) Is there any NROR status certificate I have to obtain ?
Kindly advise.
Bests regards
Bala Krishnan
Raviraj Parekh
Dear Bala Krishnan,
You can avail RNOR status.On RNOR Status only the interest on the Foreign Currency Nonresident account that will continue to be tax-free till such time that you retain your RNOR status. You need not to avail RNOR status certificate.
Vivek Tilve
Dear Sir,
I am having RNOR status for Financial Year 2016-2017 (Assessment Year 2017-18).
I understand that any foreign income is not taxable in India during RNOR status
My question is -While filling up ITR 2 do I need to disclose my foreign account holdings in the schedule FA of ITR2?
Raviraj Parekh
A resident assessee having any assets (including financial interest in any entity) located outside India or signing authority in any account located outside India, shall fill out schedule FA and furnish the return.As per me you need to file ITR2
Achyut D. Nagarkar
I am an engineer working in Dubai for over 30 years & will be returning to India next year.
My doubts are as follows:
As everybody knows, FCNR deposits are held in foreign currency & NRE deposits are held in Indian Rupees. Now my questions are – While I have the RNOR status, 1) Is interest on FCNR deposits exempt from income tax? 2) Is interest on NRE deposits exempt from income tax? 3) Is the interest on FCNR & NRE deposits exempt from income tax until I have the RNOR status OR is it exempt until the maturity of these deposits – which may be longer than the period of my holding RNOR status for say 2 years?
Please provide a clear & specific answer for all the three questions separately.
Raviraj Parekh
Dear Achyut,
Answers of your queries are given below –
1) Is interest on FCNR deposits exempt from income tax? – Yes till you hold RNOR status.
2) Is interest on NRE deposits exempt from income tax? – No
3) Is the interest on FCNR & NRE deposits exempt from income tax until I have the RNOR status OR is it exempt until the maturity of these deposits – Till you hold RNOR Status.
Pravin Bhagat
I am holding RNOR status as per given guideline. I have USA salary income from April 2016 to July 2016 and after that I have India salary income from Aug 2016 to Mar 2017 (I came back to India after 6 Years from USA in end of July 2016).
I have filed income tax return in USA for 2016 and I have spent USA Salary to my son’s collage fees in USA and did not transferred any money to India.
In these case, do I have to pay Tax on my USA Salary which I have earned from April to July 2016 in USA?
Raviraj Parekh
No Pravin, You need not to pay any tax on salary income of USA in India.
Rajesh Shah
I am out of india for job for financial year 16-17, i have income in India too.
Before this I was in India only,
I am liable for taxation on income in India,
What about Income out side India?
Am I liable for taxation of that too.
Raviraj Parekh
You are liable to pay tax in Income based at India.If you are bringing foreign income in India that income also comes under income tax ambit.
RAJ M
Sir,
Kindly advise on the following points.
1) Do i need to pay taxes on the interest arising out of my FDS ( long term ) despite the fact that i will return to India after staying abroad for 12 years.
2) Since the fd money is not earned in India, will the interest arising would be taxable after my status gets converted from NRI to resident.
Thank you
Raviraj Parekh
1) Do i need to pay taxes on the interest arising out of my FDS ( long term ) despite the fact that i will return to India after staying abroad for 12 years. – Yes you need to pay taxes.
2) Since the fd money is not earned in India, will the interest arising would be taxable after my status gets converted from NRI to resident. – It will be taxable.
John Mathew
Dear Sir,
I have read all the comments posted, but regret to note that none of the replies explicitly made it clear that when a person on RNOR status is eligible for tax exemption for 3 years (which is during the RNOR status) for any interest income generated beyond the annual income of 2.5 lacs from the transfer of his NRE deposits (not FCNR account) to RFC account.
Raviraj Parekh
Hi,
RNOR benefits are given on Interest earned on Foreign Currency Non Resident (FCNR) bank account or deposit held in India (until maturity). It is also applicable to Interest on foreign currency accounts held in India.It is not related to Indian Income. Income earned in India is taxable to even RNOR.
N.Srinivasan
Greetings
I was an NRI for the last 24 years
I returned to india for good during April 2018
I am eligible for RNOR status
I need your inputs for the following
1) RNOR status for how many years ?
2) interest on NRE FDs ( in rupees ) taxable during RNOR or not ?
3) Do I have to close all my NRE savings accounts
Your early response is highly appreciated
Regards
Raviraj Parekh
Dear Srinivasan,
RNOR status is offered only for 3 years. You are eligible for RNOR status. Interest on on NRE FD (Rupee) is taxable. Only interest earned from FCNR (foreign currency) is tax free under RNOR status. If you are planning to stay in India you need intimate bank about change in your resident status.
Tap
From articles understand that NRE FCNR Interest will be Tax free for RNOR status (max 3 yrs, subject to fulfilling criteria). Just wish expert advice if NRE -IINR (₹)- FD Interest will also be Tax free (max 3 yrs, subject to conditions as laid down) to RNOR status? This is because no one advised me to remit money in Foreign currency to get the advantage
Raviraj Parekh
Dear Tapan,
Only Foreign currency money deposited from abroad earlier will be tax free(Subject to condition of RNOR). All NRE INR amount is taxable.
Sachin
I still don’t understand concept of “3 Years” RNOR Status.
lets take an example: (here Year means the financial Year from 1st Apr to 31-Mar)
Rahul was working abroad since Year 2000 and visiting India every year and staying at most 20 days per year,
He retires and comes back to India in Jan 2015 for a permanent stay. now in this case, his status should be as follows:
Year: 2000 to 2014 : Status “NRI”
Year: 2015 : Status “NRI” as he is in India for less than 182 days
Year: 2016 : RNOR
Year: 2017 : RNOR
Year: 2018 : RNOR or ROR ??? . Preceding 2 Years in India plus more than 730 days in India
As mentioned, the RNOR benefit is 3 Years, but just in this example it seems its just 2 Years. or am I missing something?
Raviraj Parekh
Dear Sachin,
RNOR Status is valid up to 3 financial years post your return back to India.
RAGHUPATHY
Hi I am an Indian and worked in Saudi Arabia for 15 years and 4 months. Now I have returned to India.
1. All my deposits are in NRI deposits (INR). Is the interest earned in them exempt form Income Tax as I would be a RONR for three years?
2. Some of the deposits will mature during the period and will be renewed. Would the interest on these deposits still be exempt as my Status would be that of an RONR and the original funds cam from outside India?
Best regards
Raviraj Parekh
1. All my deposits are in NRI deposits (INR). Is the interest earned in them exempt form Income Tax as I would be a RONR for three years? – Only FCNR (Foreign currency) interest is tax free during RNOR. In this case your interest is not exempted.
2. Some of the deposits will mature during the period and will be renewed. Would the interest on these deposits still be exempt as my Status would be that of an RONR and the original funds cam from outside India? – Is it FCNR or Normal INR FD?