Library / Income-tax Act, 2025: The Professional's Master Guide
62. Case Study 15: Returning NRI and the RNOR Window
Facts. Vikram returns to India on 15 May 2026 after 12 years in the US. He will be RNOR for Tax Years 2026-27 and 2027-28 (non-resident in 9 of the 10 preceding years), and ordinarily resident from Tax Year 2028-29. His foreign assets: US listed shares with an unrealised gain of Rs. 40 lakh; a US rental flat earning Rs. 15 lakh a year; a US bank account earning Rs. 2 lakh a year; a US retirement account.
Item | While RNOR (2026-27, 2027-28) | Once ROR (2028-29 onwards) |
|---|---|---|
Sale of US shares | Gain not taxable in India if received outside India | Taxable in India; credit for any US tax |
US rental income | Not taxable in India (foreign income, not from a business controlled in India) | Taxable in India with foreign tax credit |
US bank interest | Not taxable in India if not received in India | Taxable in India |
US retirement account | Accumulation not taxed in India | Specified retirement account relief under section 158 may allow deferral to withdrawal |
Schedule FA reporting | Not required | Required for all foreign assets |
Indian NRE deposits | Must be redesignated as resident or RFC accounts on return; interest becomes taxable | Taxable |
Plan. Vikram should consider selling the US shares during his RNOR years, keeping proceeds abroad or bringing them in as capital, so that the Rs. 40 lakh gain is not taxed in India (the US generally does not tax capital gains of non-resident aliens on listed shares, but confirm US rules). He should document the date of return (passport stamps) to prove RNOR status, and plan the rental property's future before he becomes ordinarily resident. From Tax Year 2028-29, he must report all foreign assets in Schedule FA.
Key point RNOR status depends on facts in earlier years. Compute it carefully for each year; a mistake can expose foreign income to Indian tax or cause failure to report foreign assets. |
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