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NRI tool · FY 2025-26

RNOR Transition Planner

s.6(6) ITA 1961 — a person is RNOR if Resident but satisfies either condition:

You are likely RNOR for this year. Conditions met:

  • In India for 729 days or less in 7 preceding financial years

This is indicative only. Verify with actual passport records and CA advice.

What this means for your income

Taxable (s.5 and s.6(6))

NOT taxable during RNOR

VERIFY

Whether business income from a business 'controlled and managed wholly outside India' is exempt for RNOR — yes, per s.5(2) + s.6(6). The word 'wholly' is critical — any Indian control element may make it taxable.

Foreign retirement account

Avoids double taxation on foreign retirement accounts by deferring Indian tax until the year of actual withdrawal from the specified account, aligning with the foreign country's taxation timing
Withdraw from foreign retirement accounts (401k, IRA, RRSP) WHILE RNOR or NR — before becoming ROR — if possible. Once ROR, foreign income is fully taxable, and while s.89A provides timing relief, the tax is ultimately due.
NRI returns to India, becomes RNOR for 2 years

Withdraw from 401k during RNOR years. Foreign income (including 401k distributions) is NOT taxable in India during RNOR.

US early withdrawal penalty (10%) applies if under 59.5 years of age. US tax still applies. India exempts during RNOR but US does not.

VERIFY

Whether 401k distributions during RNOR are truly exempt in India — RNOR exempts foreign income per s.5 + s.6(6); s.89A defers Indian tax to withdrawal; but if taxpayer is RNOR during withdrawal year, combined effect = no Indian tax. This is the most tax-efficient window. Confirm with CA for specific situation.

VERIFY

Whether Roth IRA withdrawal is taxable in India — Roth IRA contributions are after-tax in the US; Roth withdrawals are tax-free in the US. Under s.89A, India taxes on withdrawal basis. But since Roth distributions are 'income' when accrued, the DTAA Article 20 (pensions) and India-US treaty notes may affect taxability. This is an unresolved area — CA consultation essential.

NRE → RFC

NRE account must be re-designated to RFC (Resident Foreign Currency) account or converted to regular INR account within 90 days of returning to India (change in residential status). RFC account interest is exempt from Indian tax for RNOR (and NR) period only.
Interest on RFC account is exempt from Indian income tax during RNOR period under s.10(15)(iv)(fa) ITA
RFC account interest becomes fully taxable once taxpayer becomes ROR
VERIFY

Whether NRE FD converted to RFC FD continues tax exemption during lock-in period after ROR transition — NO, exemption ends with RNOR period. ROR = full taxation on RFC interest. Prematurely breaking FD to avoid taxation may attract premature withdrawal penalties.

RNOR window calendar

  1. Count India presence days for each of the last 10 financial years
  2. If NR in 9 of last 10 years → RNOR in year of return
  3. If India days in last 7 years ≤ 729 → also RNOR
  4. Either condition alone is sufficient
  5. Year-by-year re-check: RNOR may last 2-3 years for a long-term NRI before transitioning to ROR
VERIFY

RNOR planning is highly fact-specific. This tool provides a framework; actual planning requires (1) passport-based day-count verification, (2) CA review of s.89A applicability for specific account types, (3) DTAA analysis for country of residence. Foreign retirement account taxation under s.89A is one of the least-settled areas of Indian international tax law.

Statutory basis: Income Tax Act 1961 ss.5, 6(1), 6(6), 89A, 90; India-US DTAA Article 20 (pensions); CBDT Notification 39/2022 + 44/2022 (s.89A specified retirement accounts); FEMA 1999 — NRE/RFC accounts