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RNOR Status NRI Can Save Tax Up To 3 Years

Posted on October 01 2020

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In recent time, many NRIs are planning to return back to India and settle down permanently, changing the investor status from NRI to a resident. They are worried about the tax liability after the change of resident status.

For example a person named Mr. Das has sent me an email stating that he is an NRI and living in UK since 2000. He is planning to return back to India to settle down permanently and wants to transfer all his saving from overseas to India. It is his retirement saving and is looking for an option for safe investment where he can get tax benefits along with reasonable returns in India. He is planning to invest in fixed deposit and even wants to enjoy tax benefit. As he is an ordinary resident and he requires to pay tax for his FDs. Therefore, His RNOR status can help him from paying tax for 3 years on his FCNR deposit. So, let us have a look at how RNOR status for NRI can help to save tax.

What is RNOR Status?

The RNOR is a Resident but Non Ordinary Resident status. It is a fluctuating state between becoming a resident of India from NRI. The special status of RNOR is only given to the individual who satisfies the following conditions:-

·If you are holding NRI status for 9 previous years out of 10 previous years.

·If you have spent less than 729 days in the past 7 years in India.

The above mentioned conditions are either or conditions which will be satisfied by any individual in order to become RNOR.

What are the Tax benefits of RNOR status?

RNOR is a special status given only to the NRI returning back to India. RNOR in India can continue to enjoy the tax benefit like the NRI. The RNOR has to pay tax only if they have generated any income from India. They will still continue to enjoy the tax benefit on Foreign Income. In other words, the income which has no relation with India is considered to be tax free.

This includes –

·Any interest or dividends from the foreign securities.

·Any capital gains from the sale of the foreign assets including property.

·Any withdrawals made from the foreign retirement funds.

·Interest earned on the Foreign Currency Non Resident (FCNR) bank account or deposit held in India until the maturity period.

·Any interest on the foreign currency accounts held in India.

How long can a person be RNOR?

It depends on the fulfilment of the conditions for the RNOR by an individual. If he fulfilled the first condition for the RNOR means if he is holding the NRI status for 9 previous years out of 10 previous years then he will get the RNOR for 1 year. Secondly, if he has spent less than 729 days in the past 7 years in India then he can get the RNOR status for 2nd and 3rd Year. Maximum he can get the RNOR status is for 3 years.

For example

Mr. Das is staying in UK for last 15 years. He will be returning to India in 2016. He is not clear where to apply for the RNOR status and how long he can be RNOR?

As Mr. Das is returning back to India in FY 2016-17 and both the condition for the RNOR is getting fulfilled and he will be RNOR for 3 years, he can enjoy tax benefit for the NRI up to FY 2018-19. After that, he will be an ordinary resident.

Mr. Das requires not to contact any authority to avail the RNOR status. The RNOR status will be relevant to a person based on his or her length of stay outside India.

Important points Investor status from NRI to a resident

·Once you become an ordinary resident you require to intimate bank. Now you cannot even operate the NRO/NRE/ FCNR accounts.

· You need to open an ordinary saving bank resident rupee account.

·You require to open a new Demat account with an ordinary status for making investment in the stock market.

·Trading account with the NRI status has to be closed.

· A new KYC is required to be filled up mentioning new address and details. This is required for Mutual Fund Investments.

·If you are not holding any PAN card then you require to apply for a new PAN card.

Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.

With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law.

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