Foreign Income Taxation for RNOR – What Is Taxable in India?

If you are a returning NRI, one of the biggest questions is: Is foreign income taxable in India during RNOR status? The answer depends on the type of income, where it is received, and whether it arises from a business controlled from India.

This guide explains foreign income taxation for RNOR in simple terms, with clear examples and practical planning points.

What Does RNOR Mean for Tax?

RNOR stands for Resident but Not Ordinarily Resident. It is a special transitional tax status under the Indian Income Tax Act that often applies to returning NRIs.

Compared to a full Resident (ROR), RNOR status provides partial relief from global income taxation in India.

Is Foreign Income Taxable for RNOR in India?

In general, an RNOR is taxed in India on:

  • Income received or deemed to be received in India.
  • Income accruing or arising in India.
  • Income from a business controlled in India or a profession set up in India, even if earned outside India.

Most foreign income earned and received outside India is not taxable for RNOR, subject to the business control condition.

Foreign Income Types During RNOR – Examples

Example 1: Foreign Salary Paid Abroad

Scenario: You work for a foreign company and receive salary in a foreign bank account outside India.

Tax in India during RNOR: Generally NOT Taxable
Example 2: Foreign Salary Credited to Indian Account

Scenario: Your foreign employer pays salary directly to an Indian bank account.

Tax in India during RNOR: May be TAXABLE (Received in India)
Example 3: Foreign Interest Income

Scenario: Interest earned on Savings or Fixed Deposits in an overseas bank account.

Tax in India during RNOR: Generally NOT Taxable
Example 4: Rental Income from Property Outside India

Scenario: You rent out a property in the UK and receive rent in a UK bank.

Tax in India during RNOR: Generally NOT Taxable
Example 5: Business Income Controlled from India

Scenario: You run a foreign business, but key management and control are exercised from India after your return.

Tax in India during RNOR: May be TAXABLE (Business Controlled in India)

RNOR vs Resident (ROR) – Foreign Income Tax Difference

Income Type RNOR Resident (ROR)
Foreign Salary Received Abroad Usually Not Taxable Taxable
Foreign Interest Received Abroad Usually Not Taxable Taxable
Foreign Rent Received Abroad Usually Not Taxable Taxable
Income from Business Controlled in India Taxable Taxable

Planning Tips to Reduce Foreign Income Tax Risk

  • Try to receive foreign salary in a foreign account during the RNOR period.
  • Review where your overseas income is credited and received.
  • Plan the timing of foreign asset sales and large withdrawals.
  • Be careful with business management decisions made from India.
  • Track your days to protect your RNOR window.

How to Check If You Qualify for RNOR

RNOR depends on your travel history and days stayed in India over multiple years. Errors in day counting can reduce or eliminate RNOR benefits.

Track Your Stay and Check Status

Frequently Asked Questions

Is foreign salary taxable in India for RNOR?
Usually no, if it is earned and received outside India and not linked to a business controlled from India.

Is foreign dividend income taxable during RNOR?
Generally not taxable if received outside India, subject to specific conditions.

When does foreign income become taxable for RNOR?
If it is received in India, arises in India, or is from a business controlled in India.

Conclusion

RNOR status can provide strong protection against global income taxation in India, but the details matter. Where you receive income and where you control business decisions can change your tax outcome.

Track your residency and plan early to protect your RNOR advantage.