RNOR (Resident but Not Ordinarily Resident)
RNOR (Resident but Not Ordinarily Resident) is a special residential status under Section 6(6) of the Income Tax Act, 1961, applicable to individuals who have recently returned to India after a long absence abroad — under which only Indian-sourced income and income received in India is taxable, with foreign income remaining exempt for two to three financial years.
India's residential status classification under Section 6 of the Income Tax Act recognises three categories for individuals: Resident and Ordinarily Resident (ROR), Resident but Not Ordinarily Resident (RNOR), and Non-Resident (NR). The RNOR status is a transitional status designed specifically for individuals who have spent significant time abroad (and thus were NRIs) and have recently returned to India.
An individual qualifies as RNOR if they satisfy either of two conditions in addition to being a resident: (a) they have been a non-resident in nine out of the ten preceding financial years, or (b) they have been present in India for 729 days or fewer in the seven preceding financial years. The Finance Act 2020 introduced a third condition applicable to certain Indian citizens and Persons of Indian Origin — but the classic RNOR status for returning expatriates continues to be based on the original conditions.
The tax advantage of RNOR status is significant. An RNOR is taxed only on: income received or deemed to be received in India, income arising or accruing in India, and income from a business or profession controlled from India. Foreign income — such as dividends from foreign investments, interest on NRE fixed deposits (which continues to be exempt), rental income from foreign property, and capital gains from foreign assets — is entirely outside the Indian tax net during the RNOR period.
For a returning NRI, the RNOR period typically spans two to three financial years. During this window, they have an opportunity to rationalise their foreign asset portfolio — selling foreign stocks, winding up foreign trusts, or restructuring foreign accounts — without triggering Indian tax liability. After the RNOR status expires and they become ROR, their worldwide income becomes fully taxable in India.
RNOR individuals must disclose their foreign assets in the foreign assets schedule of ITR-2 or ITR-3 but are not required to pay tax on foreign income during the RNOR period. Compliance obligations around foreign assets (including the Black Money Act, 2015 provisions) continue to apply, so proper disclosure is essential even when no tax is payable on the foreign income.