RNOR Status Explained: The 2 to 3 Year Tax Window for NRIs Returning from the US (2026)

What is RNOR? The transition window between NRI and full resident

Indian tax law recognizes three statuses: non-resident (NRI), resident but not ordinarily resident (RNOR), and resident and ordinarily resident (ROR). As an NRI, India taxes only your India-source income. As an ROR, India taxes your worldwide income. RNOR sits in between: you have become a resident by day count, but India still leaves most of your foreign income alone.

The Income Tax Department's non-resident FAQ puts the qualifying tests plainly: "An individual remains not ordinarily resident in a tax year if he was non-resident in nine out of ten preceding years or stayed in India for 729 days or less in the preceding seven years." (incometax.gov.in, Non-Resident FAQ)

One structural note for 2026: India's new Income Tax Act, 2025 applies to tax years beginning on or after April 1, 2026. The residency tests carry over intact. Section 6(13) of the new Act mirrors section 6(6) of the 1961 Act, and the 9-of-10-year and 729-day look-backs count years that were governed by the old Act. So nothing about your RNOR math changes because of the new statute.

The two tests: 9-of-10 years and the 729-day rule

You first become a resident under the day-count rules (commonly 182 days in the financial year, or a 60-day threshold combined with 365+ days over the preceding 4 years; confirm the thresholds that apply to your category with a CPA). Once you are a resident, you check whether you are RNOR:

Test 1: 9-of-10. Were you a non-resident in at least 9 of the 10 financial years before this one? If you spent roughly a decade in the US on H-1B, L-1, or a green card with only short trips home, you almost certainly pass this in your first year back, and usually your second.

Test 2: 729 days. Add up every day you were physically in India across the 7 financial years before this one. If the total is 729 or less, you are RNOR even if Test 1 fails. Count arrival and departure days carefully, pull your passport stamps and flight history, and keep the worksheet. This test is what typically buys returnees their third RNOR year.

A quick worksheet: list the 7 financial years before the year you are testing, write your India days for each (including vacations and family visits), and total them. Many returnees are surprised how fast three or four long Diwali trips add up.

How long does the window last? Worked examples by return date

RNOR is not a fixed grant of "3 years." It falls out of the two tests, re-run each year. The commonly quoted "2 to 3 years" is a derived result, not a number printed in the statute, so treat these examples as illustrations and run your own day counts.

Take an NRI who moved to the US in 2015 and visited India only briefly since (near-zero India days in the look-back).

• Returns July 2026 (FY 2026-27, about 274 India days that year): Resident in FY 2026-27, but non-resident in 9 of the prior 10 years, so RNOR. Same logic holds for FY 2027-28. In FY 2028-29, Test 1 fails (two resident years now sit in the look-back), but the 7-year day count is roughly 274 + 365 = 639 days, under 729, so RNOR a third year. FY 2029-30 crosses 729 days, and full ROR begins.
• Returns early April 2026 (FY 2026-27, about 360+ India days that year): The first two years work the same way. But for FY 2028-29, the 7-year count is roughly 360 + 365 = 725 or more, right at the edge of 729. A return on April 1 itself produces about 365 + 365 = 730 days and fails by a single day, leaving only 2 RNOR years.
• Returns January 2027 (late in FY 2026-27, about 90 India days that year): You may not even become a resident for FY 2026-27, which effectively extends your NRI status and can shift the whole RNOR clock a year later. The 120-day rule discussed below can complicate this, so model it before booking flights.

The pattern to remember: a return date later in the financial year usually preserves more of the 729-day budget for your third-year test. Verify your exact counts with a CPA before relying on year 3.

What stays untaxed in India during RNOR, and what does not

Under the scope-of-income rules (the proviso to Section 5(1) of the Income-tax Act), an RNOR's income accruing or arising outside India is not taxable in India unless it is derived from a business controlled in India or a profession set up in India. Have a CPA confirm the application to your facts, but the practical shape is:

Generally outside Indian tax while RNOR: US capital gains on stocks and RSUs sold from a US brokerage, US bank and bond interest, dividends from US holdings, rental income from US property, and 401(k) or IRA growth.

Taxed in India even while RNOR: salary for work performed in India (including remote work for a US employer while sitting in Bangalore, which is generally India-source; confirm with a CPA), Indian rental income, interest on regular Indian savings and fixed deposits, and gains on Indian assets.

The carve-out to respect: if you start consulting or running a business from India, income from a business controlled in India or a profession set up in India is taxable even if clients pay you abroad. Structure this carefully before invoicing.

And remember the US side never paused: as a US citizen or green card holder you still report worldwide income to the IRS, and even after giving up US status you may have US filing duties on US-source income. See our guide on how India income shows up on your US tax return.

Planning moves before you fly

RSUs and US stocks. Gains realized while RNOR are generally outside Indian tax, which gives you flexibility on timing, but the US side (federal and state) still taxes the sale, and your state residency end date matters. Selling before you sever US state residency versus during RNOR produces different combined outcomes. We walk through the sequencing in should you sell RSUs before moving back to India.

401(k). Withdrawals taken during the RNOR window are commonly planned on the basis that India does not tax them while foreign-source income is out of scope, though the US will still tax the distribution and may add its early-withdrawal penalty. This India-side treatment follows from the RNOR scope rules but you should confirm it against current law with a CPA before executing, and compare it against simply leaving the account to grow and dealing with taxation as an ROR later under the treaty.

NRE and FCNR deposits. NRE interest exemption is tied to your status as a person resident outside India under FEMA, which generally ends when you return with intent to stay. Banks require redesignation of NRE/NRO accounts after return. FCNR deposits are widely understood to retain their interest exemption until maturity while you are RNOR, but confirm the current position under Sections 10(4) and 10(15) and RBI's FEMA rules with your bank and a CPA before counting on it.

The US side of the move year

The year you leave the US is usually a dual-status or part-year year: resident for the months you lived there, non-resident after. Green card holders face a bigger question, because keeping the card keeps full US worldwide taxation, and surrendering it can trigger the expatriation rules for long-term residents. Our guide on the US exit tax for green card holders moving to India covers who is a covered expatriate and what to do about it. You will also want to keep FBAR and Form 8938 reporting for Indian accounts on your checklist for every year you remain a US person.

Traps that end RNOR early or complicate it

The 120-day rule. For Indian citizens and PIOs visiting India who earn more than Rs 15 lakh from Indian sources (income other than foreign-source income), the 60-day leg of the residency test is read as 120 days, combined with 365+ days in the preceding 4 years. If you have meaningful Indian income (rent, deposits, consulting), long "scouting trips" before the actual move can tip you into residency a year earlier than planned.

Deemed residency. An Indian citizen with total income above Rs 15 lakh (other than foreign-source income) who is not liable to tax in any other country by reason of domicile or residence is a deemed resident, and deemed residents are treated as RNOR. This mostly bites people who leave the US, do not land tax residency anywhere, and still have Indian income. RNOR treatment softens the blow, but it changes your filing picture.

Miscounted days. The 729-day test is unforgiving. Arrival and departure days, layovers that turned into entries, and forgotten family trips all count. Reconstruct from passport stamps and airline records, not memory.

Filing while RNOR

Becoming RNOR does not remove your Indian filing obligation if your India-source income exceeds the basic exemption or you otherwise meet a filing trigger. You will typically file ITR-2 or ITR-3 depending on income types; confirm the correct form for your year with a CPA. Schedule FA (foreign asset reporting) is generally framed around ordinarily residents, and many practitioners take the position that RNORs are outside it, but get written advice for your facts before leaving foreign accounts off an Indian return. Where the same income is taxed in both countries, the India-US treaty and foreign tax credit rules can provide relief; the paperwork (Form 67 on the India side) has deadlines, so plan it with the return, not after.