NRI taxation · Bangalore · RNOR · NRE/NRO · DTAA · Schedule FA
Returning NRI in Bangalore: the RNOR window, the NRE interest trap, and the s.195 TDS on your property sale.
Bangalore has India's largest returning-NRI cohort. The four questions that decide your tax position — residency, NRE interest, property, and foreign assets — each have a specific section. None of them wait for the ITR deadline.
The four NRI tax traps
Where returning-NRI compliance goes wrong.
Returning to India is a residency event with four separate statutory clocks. These are the points where Bangalore returnees — and their advisors — most often misread the position.
RNOR — the three-year window after you return
On returning to India, you remain a Resident but Not Ordinarily Resident (RNOR) for up to 3 consecutive years if you were a non-resident in 9 of the 10 previous years, or stayed 729 days or less in India in the 7 previous years — s.6(6) of the Income-tax Act. During RNOR, foreign-sourced income — US bank interest, foreign rental, foreign capital gains — is not taxed in India (s.5(2) read with s.6(6)). But income earned or received in India IS taxed even during RNOR. Bangalore's returning tech cohort typically gets this window while US accounts stay untouched; the trap is assuming it is permanent.
s.6(6) · 9 of 10 yrs / ≤729 days in 7 yrs · foreign income exempt only in RNOR
NRE / NRO / FCNR — the interest exemption flips on return
While you are a non-resident, interest on NRE and FCNR deposits is exempt under s.10(4) of the Income-tax Act. The moment you become a resident — including RNOR, because RNOR is still a resident — that exemption ends: NRE interest becomes taxable, and NRO interest was always taxable because it accrues in India. Banks do not flag this. A Bangalore returnee who keeps a US-salary-funded NRE account open for three years and files an ITR that omits the interest is sitting on a s.148A notice.
s.10(4) exempt only for non-residents · RNOR still taxable on Indian-source · AIS flags NRE interest
Bangalore property — rental, deemed let-out, and the s.195 sale trap
Rental income from a Whitefield or Sarjapur flat: 30% standard deduction under s.24(b) plus municipal taxes under s.24(a). Own two or more self-occupied houses and every extra one is "deemed let-out" — notional rent is taxed under s.23(4). On selling the property as an NRI, the buyer must deduct TDS under s.195 on the FULL sale consideration at the rate applicable to your income — commonly 20% plus surcharge and cess on long-term gains — unless you obtain a lower or nil deduction certificate under s.197 before the sale. The buyer's CA applying s.194-IA (1%) instead is the most common error — and it is your refund that suffers.
s.24(b) 30% deduction · s.23(4) deemed let-out · s.195 + s.197 on NRI sale
US tech money — DTAA, Form 10F, and Schedule FA
Bangalore returnees from US tech carry RSUs, ESPP, US brokerage, 401(k) and IRAs. The India-US DTAA (Articles 15 and 23) governs salary and residence taxation and grants foreign tax credit — but claiming relief requires a US Tax Residency Certificate and Form 10F filed before the ITR (s.90(4)/(5)). Every foreign account — brokerage, bank, retirement plan, RSU holding — must be disclosed in Schedule FA of the ITR each year. Failure to disclose attracts penalties of up to ₹10 lakh under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (s.43(1)).
DTAA Art 15/23 · s.90(4)-(5) Form 10F + TRC · Schedule FA · Black Money Act ₹10L
Bangalore local reality
What's different for Bangalore's returning NRIs.
Return migration at scale
Bangalore receives the largest returning-NRI cohort of any Indian city — US, UK, Canada, Australia returnees concentrated in Whitefield, Sarjapur, Electronic City, Indiranagar and HSR Layout. Each return converts a simple US-tax profile into an India-residency question with a 3-year countdown.
Family property and succession
Many returnees hold shares in parents' Bangalore properties or joint Hindu family assets. On intestate succession the Hindu Succession Act 1956 (s.8) distributes equally among Class I heirs — a nominee on the khata or bank account is not a legal heir. A Will or partition deed, not nomination, fixes the outcome.
FATCA runs both ways
Indian banks report US-citizen and US-GC-holder accounts to the IRS under FATCA, and the IRS exchanges data with India under the IGA. A Bangalore returnee who holds a green card or US citizenship has dual reporting obligations — US tax returns and Indian Schedule FA — and neither side accepts the other's filing as sufficient.
AIS will show it all
AIS aggregates interest, dividends, property TDS (s.194-IA/195) and foreign remittances. The classic mismatch: an ITR-1 filed by a returned NRI whose AIS shows NRE interest, a US brokerage dividend, and a property sale with 195 TDS. The RNOR analysis must happen BEFORE filing, not after a 148A notice.
Our engagement
Five tracks for a compliant Bangalore returnee.
RNOR transition planning
s.6(6) residential-status computation, foreign-income map, and a three-year RNOR tax plan before the window closes.
On return + annual
NRE / NRO / FCNR restructuring
s.10(4) exemption review on return, account conversions, and interest-tax planning across the RNOR years.
On return
Bangalore property compliance
Rental income s.24, deemed let-out s.23(4), and sale structuring with s.195 TDS and s.197 lower-deduction certificate.
Annual / on sale
DTAA foreign tax credit
TRC procurement, Form 10F filing, FTC computation under the India-US DTAA for RSUs, brokerage and retirement income.
Annual
Schedule FA + AIS compliance
Full foreign-asset disclosure in Schedule FA, AIS cross-check, and FATCA / Black Money Act exposure review.
Annual
Common questions
Statute-cited answers for Bangalore NRIs.
I returned from the US in June 2025 and still have US salary and bank interest. Am I taxable on it in India?
It depends on your residential status. Under s.6(6), if you were a non-resident in 9 of the 10 previous years, or stayed 729 days or less in India in the 7 previous years, you are a Resident but Not Ordinarily Resident (RNOR) for up to 3 consecutive years after return. During RNOR, income that accrues or arises outside India and is not received in India is NOT taxable in India (s.5(2) read with s.6(6)) — so US-sourced salary already banked and US bank interest generally stay outside Indian tax for those years. The moment you become an Ordinary Resident (ROR), your global income is taxable. Get the status computed in writing before your first ITR after return.
Is interest on my NRE account tax-free after I return to Bangalore?
No — once you are a resident (including RNOR), the s.10(4) exemption no longer applies. Section 10(4) exempts NRE/FCNR interest only while you are a non-resident. RNOR is still a "resident" for the Act, and NRE interest accrues in India, so it is taxable in India even during your RNOR years. NRO interest was always taxable. The practical fix: review the account mix on return — keeping an NRE account for its tax-free interest is a misunderstanding that shows up in AIS.
I am selling my Bangalore flat as an NRI. What TDS does the buyer deduct?
The buyer must deduct tax under s.195 on the full sale consideration at the rate applicable to your income — for long-term capital gains that is 20% plus applicable surcharge and health and education cess, not the 1% rate under s.194-IA that applies when the seller is a resident. To get a lower or nil rate, apply to the Assessing Officer under s.197 BEFORE the sale and furnish the certificate to the buyer. You must also file an Indian return to claim the refund of any excess TDS, since s.195 tax is withheld on the consideration, not on the gain.
I have a US brokerage account and a 401(k). Do I need to declare them in my Indian return?
Yes. Schedule FA of the ITR requires disclosure of every foreign financial asset — bank accounts, brokerage accounts, retirement accounts (401(k), IRA), ESOP/RSU holdings and immovable property abroad — wherever you hold them. Disclosure is separate from taxability: during RNOR the income may not be taxable, but the asset must still be reported. Failure to disclose or inaccurate disclosure attracts penalties under s.43(1) of the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 — up to ₹10 lakh — independent of the income-tax on the asset.
I rent out my Whitefield flat for ₹60,000 a month. How is that taxed?
Gross rent of ₹7.2 lakh is income from house property. You deduct municipal taxes actually paid (s.24(a)) and a 30% standard deduction under s.24(b) — ₹2.16 lakh on the gross figure — and the balance is taxed at your slab rate. There is no separate deduction for repairs, insurance or society charges; the 30% covers all of it. If the flat is not your residence (you live elsewhere), it is a let-out property and this applies fully. If you own it along with the house you live in, the second self-occupied house becomes "deemed let-out" and is taxed on notional rent under s.23(4) — a trap for Bangalore owners with two homes.
Book an NRI diagnostic
Returning-NRI tax review — 60 minutes, before your first ITR.
We compute your residential status in writing, map NRE/NRO/FCNR interest exposure, review Bangalore property rental and any s.195 sale, and build the Schedule FA disclosure list — so the RNOR window is used, not lost.
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