RNOR Status: 4-Year Lookback, Exempt Foreign Income and Sunset Year Planner
RNOR status lasts until you fail both s.6(6) tests — non-resident in 9 of the prior 10 years, or 729 days or fewer in India across the prior 7 years — and the moment you become ROR, foreign salary, foreign capital gains and foreign rent all become taxable in India.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
RNOR lasts until you fail both lookback tests, and the year you fail them is your "sunset year" — the first year your foreign income becomes taxable in India. A returning NRI is typically Resident but Not Ordinarily Resident (RNOR) under s.6(6) of the Income Tax Act 1961 for 2–3 years after return. While RNOR, foreign salary, foreign capital gains, foreign rent and foreign dividends stay entirely outside Indian tax even though you are legally a resident. The moment both conditions in s.6(6) fail, you become Resident and Ordinarily Resident (ROR) and your worldwide income is taxed in India — permanently.
NRI vs RNOR vs ROR: What Gets Taxed
The difference between RNOR and ROR is worth real money: a returning NRI who files as ROR from year one pays Indian tax on foreign rental income, foreign brokerage gains and foreign pension — money that would have been fully exempt if the RNOR window had been claimed correctly.
The Two RNOR Tests (s.6(6))
You qualify as RNOR in a financial year if you meet either condition:
- The 9-of-10 test: you were a non-resident in 9 out of the 10 previous financial years, or
- The 729-day test: you were present in India for 729 days or fewer during the 7 previous financial years.
The tests are cumulative years of the past, not of the current year. So your status in each return year depends entirely on your history — which is why the RNOR window can be planned year by year.
The Sunset Year: When the Protection Ends
Your sunset year is the first FY in which both s.6(6) conditions fail:
- Condition 1 fails when, in the 10 preceding years, you were non-resident in 8 or fewer years (because each year of residence in India after your return "uses up" one of your 9 non-resident years).
- Condition 2 fails when your India presence across the prior 7 years crosses 729 days — which happens around your second full year back, since two full years in India is 730 days.
For most returning NRIs, both conditions fail in the same year, converting you to ROR 2–3 years after return. The precise year depends on when you returned and how much you travelled before returning.
Worked Example: Rakesh's Three-Year Window
Rakesh, an Indian citizen, returns to India permanently from London on 1 April 2024 (start of FY 2024-25). He was fully non-resident from FY 2014-15 to FY 2023-24.
Rakesh gets 2 RNOR years (FY 2024-25 and FY 2025-26); FY 2026-27 is his first ROR ("sunset") year, and his foreign income becomes taxable from that year. If he had returned in October 2024 (part-year in India), his day counts would shift, potentially extending or shortening the window — which is why the day-level computation matters.
The Money Saved in Each RNOR Year
Rakesh's continuing foreign income while living in India:
- UK rental income: £18,000/yr × ₹106 = ₹19,08,000
- US brokerage dividends: ₹4,00,000
- Total foreign income: ₹23,08,000
During FY 2024-25 and FY 2025-26 (RNOR), this ₹23.08 lakh is exempt from Indian tax. From FY 2026-27 (ROR), it is taxable at slab rates. On the FY 2025-26 new-regime slabs (0–₹4L nil, ₹4–8L 5%, ₹8–12L 10%, ₹12–16L 15%, ₹16–20L 20%, ₹20–24L 25%, above ₹24L 30%), the tax on ₹23.08 lakh is approximately ₹2,88,000 (including 4% cess) — so the RNOR window is worth ~₹2.9 lakh per year to Rakesh, or ~₹5.8 lakh across two full RNOR years.
Planning the Sunset Year: What You Must Do Before ROR Kicks In
- Map the exact sunset year using your actual day counts, not an estimate. One trip can flip a 729-day computation.
- Realise foreign capital gains before the sunset year. Gains realised while RNOR are exempt; gains realised after are taxable. Selling a foreign asset before the sunset year can be the difference between a six-figure tax bill and nothing.
- Check foreign rental income timing. Consider restructuring rental receipts, lease dates or the sale of a rental property before ROR begins.
- Review foreign bank accounts and brokerage accounts — from the first ROR year, Schedule FA foreign-asset disclosure applies and foreign income must be reported (see the Schedule FA article).
- Claim the DTAA foreign tax credit for any foreign taxes paid in the sunset year onwards — but remember the credit is capped at Indian tax on the same income.
- File every RNOR year correctly — the exemption applies only if the return claims the correct status. Filing as ROR is the most common (and most expensive) returning-NRI error.
Changed FY 2025-26: For FY 2025-26 (AY 2026-27), the RNOR exemption for foreign income operates under s.6(6) read with s.5(1) and s.5(2) of the Income-tax Act 1961 — the same framework as prior years. The Income-tax Act 2025, effective 1 April 2026, re-enacts the RNOR provisions with unchanged tests; it governs returns from AY 2027-28.
Common Mistakes Returning NRIs Make
- Filing as ROR in year one — overpaying on foreign income that s.6(6) exempts.
- Assuming RNOR lasts a fixed number of years — it depends entirely on your personal day history.
- Realising foreign capital gains after the sunset year — a tax event that was avoidable by selling before.
- Not disclosing foreign assets from the first ROR year — Schedule FA penalties under the Black Money Act start at ₹10 lakh per asset per year.
- Ignoring foreign business income — RNOR exemption does not cover income from a foreign business controlled or profession set up from India.
FAQ
Q1: How many years can I stay RNOR after returning to India?
Typically 2–3 years, but there is no fixed count. RNOR continues while either s.6(6) condition holds: NRI in 9 of the prior 10 years, or ≤729 days in India across the prior 7 years. Compute your own year-by-year position; don't assume a standard window.
Q2: Is foreign salary exempt while RNOR?
Yes. While you are RNOR, foreign salary is not taxable in India because it does not fall within the scope of income taxable for a not-ordinarily-resident person under s.5(1). The exemption ends in your sunset year, when you become ROR.
Q3: Are foreign capital gains exempt during RNOR?
Yes, capital gains on foreign assets realised while you are RNOR are generally exempt from Indian tax. Gains realised after you become ROR are taxable in India. Consider realising gains before your sunset year — a legitimate planning step.
Q4: What happens in the sunset year?
The sunset year is the first FY when both s.6(6) conditions fail, converting you to ROR. From that year, your worldwide income — foreign rent, dividends, capital gains, salary — is taxable in India, and Schedule FA foreign-asset disclosure becomes mandatory.
Q5: Can RNOR exemption apply to a foreign business I control from India?
No. The RNOR exemption explicitly excludes income from a business controlled in India or a profession set up in India, even if the business operates abroad. Such income is taxable from the RNOR year itself.
Q6: I returned in October 2024. How does that change my RNOR window?
A part-year return changes your day counts in the return year and may shift the 729-day test. If you were in India for only ~90 days in FY 2024-25, both tests may hold for an extra year, extending your RNOR window compared to someone who returned on 1 April. Compute your exact position.
Q7: Do I need to file a separate form to claim RNOR?
No. You simply file your ITR as RNOR with the correct residential status and declare only the taxable income. There is no approval process — but you must be able to substantiate the status with day-count records.
Use our RNOR Transition Planner to compute your exact sunset year from your actual travel history.
Sources
- Section 6(6), Income-tax Act 1961 — conditions for "not ordinarily resident".
- Sections 5(1) and 5(2), Income-tax Act 1961 — scope of total income for residents, RNOR and non-residents.
- Income-tax Act 2025, s.6 and s.5 (re-enactment, effective 1 April 2026).
Plan the sunset year before you return, not after your first ROR return is filed. Book a consultation at harunraaj.com.
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