Key Takeaways
- RNOR (Resident but Not Ordinarily Resident) is a transitional tax status for individuals who have recently returned to India after long stays abroad.
- You qualify as RNOR if you satisfy either condition under Section 6(6): you were non-resident in India in 9 out of 10 preceding years, or your total stay in India was less than 730 days in the preceding 7 years.
- As an RNOR, your foreign income is not taxable in India, except income from a business controlled in India or a profession set up in India (Section 5(1)).
- RNOR individuals cannot use ITR-1 or ITR-4. You must file ITR-2 (or ITR-3 if you have business income).
- To claim credit for taxes paid abroad on income that is taxable in India, file Form 67 under Rule 128 before the end of the assessment year.
What is RNOR status under Indian income tax law? RNOR (Resident but Not Ordinarily Resident) is a residential status under Section 6(6) of the Income Tax Act. An individual qualifies as RNOR if they were non-resident in 9 of the 10 preceding years, or if their total stay in India was below 730 days in the preceding 7 years. RNORs are taxed only on Indian-source income and foreign income from an Indian-controlled business or profession. Verified against: incometaxindia.gov.in/w/residential-status and incometaxindia.gov.in/w/section-6-24.
Looking for expert help with RNOR residential status, returning NRI tax filing and DTAA Form 67 services? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant end-to-end: filings, notices, and advisory, all in one place.
If you have worked abroad for several years and recently moved back to India, your tax status for the first two to three years is likely RNOR, not fully resident. This distinction matters because it determines whether your foreign income, retirement accounts, rental income from overseas property, and investment gains abroad are taxable in India.
This guide explains how RNOR status works under Section 6 of the Income Tax Act, what income falls within its scope, which ITR form to use, and how to claim Double Taxation Avoidance Agreement (DTAA) relief for AY 2026-27 (FY 2025-26).
Step 1: Are You a Resident? The Basic Day-Count Test
Before determining RNOR status, you must first qualify as a "resident" under Section 6(1). An individual is resident in India for a financial year if they satisfy either condition:
- 182-day rule: Present in India for 182 days or more during the financial year, OR
- 60-day rule: Present in India for 60 days or more during the financial year AND 365 days or more in the 4 immediately preceding financial years.
If you do not satisfy either condition, you are a non-resident (NR), and RNOR does not apply. Non-residents are taxed only on Indian-source income. See the NRI income tax guide for NR-specific rules.
Special exceptions to the 60-day rule:
- Indian citizen leaving India for employment abroad, or as crew of an Indian ship: The 60-day threshold is replaced by 182 days. This means the only way to become resident is the 182-day test.
- Indian citizen or Person of Indian Origin (PIO) visiting India with total income (other than foreign sources) exceeding Rs 15 lakh: The 60-day threshold is replaced by 120 days (Finance Act, 2020, effective AY 2021-22 onward).
Step 2: The RNOR Test Under Section 6(6)
Once you are classified as a resident, the next question is whether you are "ordinarily resident" or "not ordinarily resident." Under Section 6(6), a resident individual is RNOR if they satisfy either of the following conditions:
| Condition | Test | Period |
|---|---|---|
| Condition A | Non-resident in India in 9 out of the 10 preceding financial years | 10 years before the current FY |
| Condition B | Total stay in India is less than 730 days | 7 preceding financial years |
Satisfying either one is enough. You do not need to satisfy both.
Practical example: Rajesh, an IT professional, left India in April 2015 and returned permanently in August 2024. For FY 2025-26:
- He was non-resident for FY 2015-16 through FY 2023-24 (9 years out of the 10 preceding years FY 2015-16 to FY 2024-25). Condition A is satisfied.
- Even if his total days in India during FY 2018-19 to FY 2024-25 (the 7 preceding years) exceed 730, Condition A alone makes him RNOR.
RNOR status typically lasts 2 to 3 years after returning to India, depending on when you return within the financial year and your travel history.
What Income Is Taxable for an RNOR?
This is the main benefit of RNOR status. Under Section 5(1) of the Income Tax Act, the scope of total income for an RNOR is narrower than for a Resident and Ordinarily Resident (ROR):
| Income type | ROR | RNOR | NR |
|---|---|---|---|
| Income received in India | Taxable | Taxable | Taxable |
| Income accruing or arising in India | Taxable | Taxable | Taxable |
| Income accruing or arising outside India from a business controlled in India or profession set up in India | Taxable | Taxable | Not taxable |
| All other foreign income | Taxable | Not taxable | Not taxable |
In plain terms, as an RNOR:
- Salary for services rendered in India, rental income from Indian property, capital gains on Indian shares or property, and interest on NRO accounts are all taxable in India.
- Foreign salary (for services rendered outside India), rental income from foreign property, capital gains on foreign investments, and interest on foreign bank accounts are not taxable, provided they do not come from a business controlled in or a profession set up in India.
- Employer NPS contribution, EPF interest, and retirement account income from Indian employers are taxable as they accrue in India.
This distinction is why RNOR status is valuable for returning professionals. If you have a 401(k) or pension in the US, rental income from a property in Dubai, or investments in a foreign stock market, none of this is taxable in India while you hold RNOR status.
Deemed Resident: Section 6(1A)
The Finance Act, 2020 introduced Section 6(1A), which creates a category of deemed resident. An Indian citizen is deemed resident in India if:
- Their total income (other than income from foreign sources) exceeds Rs 15 lakh during the year, AND
- They are not liable to tax in any other country by reason of domicile, residence, or similar criteria.
This targets Indian citizens living in zero-tax jurisdictions (such as the UAE or Bahamas) while earning significant income from Indian sources. A deemed resident under Section 6(1A) is automatically treated as RNOR, not as ROR. This means their foreign income (other than from Indian-controlled business or profession) remains outside the Indian tax net.
"Income from foreign sources" is defined as income that accrues or arises outside India, except income from a business controlled in or a profession set up in India (Explanation to Section 6(1A)).
Which ITR Form for RNOR?
RNOR individuals cannot file ITR-1 (Sahaj) or ITR-4 (Sugam). Both forms are restricted to individuals who are Resident and Ordinarily Resident (incometax.gov.in, AY 2026-27 applicability guide).
| Situation | ITR Form |
|---|---|
| RNOR with salary, house property, capital gains, other sources (no business income) | ITR-2 |
| RNOR with business or professional income | ITR-3 |
In the ITR form, select "Resident but Not Ordinarily Resident" as your residential status in Part A (General Information). This is a dropdown selection on the e-filing portal.
For a walkthrough on ITR-2, see the ITR-2 filing guide.
Claiming DTAA Relief: Form 67 and Rule 128
If you earn income that is taxable both in India and in the country where it was earned (for example, interest on an NRO account that is also reported in the US), you can claim Foreign Tax Credit (FTC) under the applicable DTAA or under Section 91 (unilateral relief where no DTAA exists).
Steps to claim FTC:
- Identify the DTAA: India has DTAAs with over 90 countries. The treaty specifies which country has primary taxing rights for each income type and the maximum tax rate each country can apply.
- File Form 67: This is mandatory under Rule 128. Form 67 is a statement of foreign income and foreign tax paid. File it electronically on the e-filing portal (incometax.gov.in) before the end of the assessment year (i.e., before March 31 of the AY).
- Attach proof: Form 67 requires you to upload proof of foreign tax paid, such as the tax return filed abroad, tax deduction certificate, or bank statement showing tax withheld.
- Claim in Schedule FSI and Schedule TR: In your ITR-2 or ITR-3, report the foreign income in Schedule FSI (Foreign Source Income) and the tax relief in Schedule TR (Tax Relief).
FTC is limited to the lower of: (a) tax payable in India on the doubly taxed income, or (b) tax actually paid abroad on that income. If the DTAA specifies a lower rate than India's domestic rate, the DTAA rate applies.
Common Mistakes RNOR Individuals Make
1. Filing ITR-1 instead of ITR-2. ITR-1 does not have a field for RNOR residential status, Schedule FSI, or Schedule TR. Filing ITR-1 as an RNOR is invalid and will result in a defective return notice under Section 139(9).
2. Reporting all global income as taxable. Many returning NRIs assume that once they become resident, all their worldwide income is taxable. For RNOR individuals, only Indian-source income and income from Indian-controlled business/profession is taxable. Reporting foreign salary, foreign rental income, or foreign capital gains incorrectly inflates your tax liability.
3. Missing Form 67 for DTAA relief. If you paid taxes abroad on income that is also taxable in India (such as NRO interest), you must file Form 67 to claim credit. Without Form 67, the FTC is denied and you pay tax twice on the same income.
4. Miscounting days for RNOR eligibility. Count actual days of physical presence in India. Both the day of arrival and the day of departure count. Maintain a travel log with passport stamps or immigration records as evidence, especially if your RNOR status is borderline.
5. Ignoring AIS and Form 26AS. The Annual Information Statement (AIS) and Form 26AS show income reported by banks, mutual funds, and other entities. Even as an RNOR, all Indian-source transactions appear here. Cross-check these before filing to reduce exposure to notices.
How Tax Garden Helps Returning NRIs
Filing as an RNOR requires careful determination of residential status, correct classification of Indian versus foreign income, and proper DTAA relief claims through Form 67. One wrong selection, such as marking yourself as ROR instead of RNOR, can result in tax on your entire global income.
Tax Garden's compliance team handles the complete ITR filing process for returning NRIs: residential status determination based on your travel history, income classification, DTAA treaty application, Form 67 filing, and ITR-2 or ITR-3 submission. Fixed pricing, no surprises.
See Tax Garden pricing for ITR filing plans.
Sources: Section 6 of the Income Tax Act 1961 (residential status and the RNOR conditions under Section 6(6)); Section 5 (scope of total income for an RNOR); the Finance Act 2020 (Section 6(1A) and the 120-day rule, per PIB); Rule 128 and Form 67 (foreign tax credit); the Income Tax Department ITR-applicability help for AY 2026-27; and the Department's guidance on double taxation relief (incometaxindia.gov.in and incometax.gov.in).