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.
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
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.
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.
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.
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.