RNOR status: the two or three tax years after moving back to India

India’s tax law gives people who have just moved back a concession ordinary residents do not get. For at least two Indian tax years, someone returning after nine or more years as a non-resident is what the Income Tax Department calls “resident but not ordinarily resident”. In that window, income that accrues and is received outside India, such as rent from a Sydney unit, stays out of Indian total income unless it comes from a business controlled in India or a profession set up there. RNOR status is fixed by arithmetic in section 6 of the Income-tax Act 2025.

The law was renumbered on 1 April 2026

The Income-tax Act 2025 came into force on 1 April 2026 and replaced the Income-tax Act 1961. The Central Board of Direct Taxes’ press release that day said the new Act was written “without altering the underlying tax policy”. The residence day counts and rupee thresholds are unchanged, but the 2025 Act counts in “tax years”, the twelve months of the financial year starting 1 April. Section 6(1) of the 1961 Act and its Explanation 1 are now sections 6(2) to 6(5), section 6(1A) is now 6(7), and section 6(6) is now 6(13).

First, you have to be resident at all

Under section 6(2) an individual is resident in India for a tax year if they are in India for 182 days or more in that year, or for 60 days or more in it having spent 365 days or more in India across the four preceding tax years.

Indian citizens who leave India as crew of an Indian ship or for employment outside India face the 182-day test alone in the tax year they leave (section 6(3)). So does an Indian citizen or person of Indian origin who, “being outside India, comes on a visit to India” (section 6(4)), unless their total income other than income from foreign sources exceeds ₹15 lakh (₹1,500,000). Then the 60-day limb returns as 120 days (section 6(5)), and a visitor in India for 120 days or more but less than 182 is RNOR (section 6(13)(b)).

The ₹15 lakh figure also drives deemed residence. Under section 6(7), an Indian citizen not liable to tax in any other country because of domicile, residence or similar criteria, with income other than income from foreign sources above ₹15 lakh, is deemed resident for that tax year whatever the day count, and section 6(13)(c) makes that person RNOR.

Section 6 does not define a visit. Without the visitor relief, a person with 365 or more days in India across the four previous tax years becomes resident 60 days after arrival; with fewer, only the 182-day test counts.

The two tests behind RNOR status

Section 6(13)(a) makes an individual “not ordinarily resident” if they were non-resident in India in nine out of the ten tax years preceding the year in question, or were in India for 729 days or less across the seven preceding tax years.

Take someone back after nine or more consecutive non-resident years. In the return year, nine of the ten preceding years are non-resident years: RNOR. In the second year, the ten preceding years are the arrival year plus nine non-resident years: RNOR again. In the third, only eight are non-resident years and the first test fails, so the window is at least two years. A resident year, even an RNOR year, breaks the count.

The 729-day test decides a third year. Arrive on 1 October, with 182 days of the tax year left, and stay, and the arrival year and the next give around 547 days, so visits in the five earlier years must total about 182 days or fewer. Arrive on 1 April and stay, and the first two years alone exceed 729 days. It is also the route for people away for less than nine years.

The residence test can also stretch the window. Land with fewer than 182 days of the tax year left, and under 365 days of visits in the previous four years, and the arrival year is a non-resident year unless deemed residence applies; the two RNOR years then begin the following April.

What RNOR status keeps out of Indian tax, and what it does not

Section 5(1) sets the scope: a resident’s total income includes income received in India, income accruing in India, and income accruing outside India. For a person not ordinarily resident, that third category is included only when it is “derived from a business controlled in or a profession set up in India”. Section 6(14) uses the same carve-out to define “income from foreign sources”.

Australian rent, ASX dividends and Australian bank interest that accrue and are received outside India sit outside the Indian net during the RNOR years. Three things do not. Indian-source income is taxed as normal: rent from a flat in Pune, interest on rupee deposits, gains on Indian shares. Salary for work done in India is deemed to accrue in India, as section 9(3)(a) regards income payable for services rendered in India as income earned in India. And section 5(1)(a) counts income “received or deemed to be received in India”, which catches Australian rent paid into an Indian account.

Bank accounts: NRE, FCNR(B) and RFC

Banking rules come under the Foreign Exchange Management Act (FEMA), which has its own definition of residence. The Reserve Bank of India’s Master Direction on Deposits and Accounts says NRE accounts “should be designated as resident accounts” or their funds moved to a Resident Foreign Currency (RFC) account, at the holder’s option, “immediately upon the return of the account holder to India for taking up employment or on change in the residential status”. NRE and FCNR(B) balances may be credited to an RFC account once the holder is resident.

Under regulation 4(B) of the RBI’s 2015 regulations on foreign currency accounts held by residents, an RFC account may hold foreign exchange received as pension or superannuation from an employer outside India, or realised from assets acquired while resident outside India. Its balances are free of restrictions on use outside India, including investment.

For tax, Schedule IV of the 2025 Act, serial number 14, read with section 11, carries forward section 10(15)(iv)(fa) of the 1961 Act. It exempts interest paid by a scheduled bank to a non-resident “or to a person who is not ordinarily resident” on foreign currency deposits whose acceptance the RBI has approved, without naming FCNR(B) or RFC accounts. The NRE interest exemption, serial number 1, is for an individual resident outside India as defined in FEMA, or one permitted by the RBI to keep the account.

The Australian side: leaving, rent and super

The ATO states that a foreign resident must declare Australian-sourced income, including rental income and capital gains on taxable Australian property, has “no tax-free threshold”, and does not pay the Medicare levy. Article 6 of the agreement between India and Australia allows income from real property to be taxed where the property is situated.

Ceasing Australian residency is itself a CGT event. Under section 104-160 of the Income Tax Assessment Act 1997, CGT event I1 happens when a person stops being an Australian resident. The ATO says “you are taken to have disposed of CGT assets for their market value at the time you stopped being a resident, except for any taxable Australian property”, which includes real estate in Australia. An individual can instead choose to disregard those gains and losses; the assets are then treated as taxable Australian property until a CGT event happens to them or the person becomes resident again.

The ATO’s super withdrawal conditions include turning 65, or reaching preservation age and retiring; its early access grounds include “being a temporary resident who is leaving Australia”. The departing Australia superannuation payment is for people who worked on a temporary resident visa; Australian and New Zealand citizens and permanent residents cannot claim it. Article 18 of the agreement makes pensions (other than those under Article 19) and annuities paid to a resident of one country taxable only in that country.

Almost every rule here turns on a date or a count: days in India over seven tax years, the arrival date, where rent is received and, for the bank, the day of return. This article is general information, not legal or tax advice.