The most valuable tax window a returning NRI has — and the one most often spent doing nothing.
When a long-term NRI returns to India, foreign income is generally outside the Indian tax charge for a transitional period. Below: how the status is calculated, what it gives you, and the UK pension decisions that are cheaper inside the window than outside it.
The short answer
For a transitional period — commonly two to three financial years — a returning NRI is Resident but Not Ordinarily Resident, and foreign income is generally outside the Indian tax charge.
It is a window, not a status you keep. What you do inside it — with UK pensions, overseas investments and UK property — is usually worth more than anything you can do afterwards.
Residential status in India is set by Section 6 of the Income-tax Act, 1961 and is worked out year by year against the Indian financial year (1 April to 31 March). It is a two-step calculation: you must first be resident, and only then can you be not ordinarily resident.
You are resident for the financial year if either of these basic conditions is met:
Two relaxations matter for NRIs. If you are an Indian citizen who left India for employment abroad, or as a member of the crew of an Indian ship, the 60-day limb is replaced by 182 days. If you are an Indian citizen or Person of Indian Origin visiting India, the 60-day limb is likewise replaced by 182 days — reduced to 120 days where your Indian-sourced income exceeds ₹15 lakh (see Rule 3 below).
Fail both conditions and you are simply non-resident (NRI) for that year, and RNOR does not arise. Meet one, and you move to Step 2.
Under Section 6(6), a resident individual is treated as Resident but Not Ordinarily Resident if any one of the following applies:
Rule 1 — the 9-out-of-10-year test
You were non-resident in India in nine out of the ten financial years immediately preceding the current year. This is the rule most long-term NRIs return on: after a decade abroad you will normally satisfy it in your first year back, and often the second as well.
Rule 2 — the 729-day test
You were in India for 729 days or less in total across the seven financial years immediately preceding the current year. This is an alternative, not an additional hurdle — you can fail Rule 1 (for example, because of a resident year part-way through the decade) and still be RNOR if your cumulative presence over seven years stays at or below 729 days.
Rule 3 — the ₹15 lakh rules (two separate clauses)
Introduced by the Finance Act 2020, these target higher-income individuals and operate independently of Rules 1 and 2. In both, "₹15 lakh" means total income other than income from foreign sources — broadly, Indian-sourced income.
Because every test looks backwards at day counts, your travel history sets the length of the window — and returning in March rather than April can cost a full financial year of RNOR.
Day counting is by physical presence, including part-days of arrival and departure, so keep passport stamps and boarding passes. The rules above are the statutory position rather than advice on your own facts; the year-by-year calculation should be confirmed before you act on it.
Once the window closes, you are taxable in India on worldwide income and gains, and the foreign asset reporting regime applies — a materially different position from your first two or three years back.
This is where returning clients most often lose money by waiting. Decisions about UK pensions have a different cost inside and outside the RNOR window, and the UK side does not pause while you decide.
If a transfer is part of your plan, read whether a QROPS transfer to India is tax-free and when the 25% charge applies. If you own UK property, the RNOR window is also usually the cheapest time to deal with it — see the 60-day UK reporting deadline for non-resident sellers.
Official sources
This page is general information about how UK and Indian rules operate. It is not a personal recommendation. Residential status is fact-specific and should be confirmed for your own day counts before any decision is taken.
Resident but Not Ordinarily Resident is a transitional Indian tax status. You are resident in India, but your foreign income is generally not taxable there — with the main exception of income from a business controlled in, or a profession set up in, India. It typically applies for the first two to three financial years after a long-term NRI returns.
It depends on your history of days spent outside India, not on a fixed grant. For someone who has been non-resident for many years, it commonly runs for two to three financial years after return, and then ordinary resident status begins. Because it is calculated from day counts, the exact end date can often be influenced by when in the year you return.
It is a two-step test under Section 6 of the Income-tax Act, 1961. First you must be resident in India for the year: 182 days or more in India in the current financial year, or 60 days or more in the year plus 365 days or more across the preceding four years (the 60-day limb rises to 182 days for Indian citizens leaving for employment abroad and for citizens or PIOs visiting India). Second, being resident, you are not ordinarily resident if any one of three rules applies: you were non-resident in nine of the ten preceding financial years; you were in India 729 days or less across the seven preceding years; or you fall in the ₹15 lakh rules — the 120-day clause for citizens and PIOs visiting India with Indian-sourced income above ₹15 lakh, or the deemed-resident provision for Indian citizens with Indian-sourced income above ₹15 lakh who are not liable to tax in any other country. Deemed residents are always classified as RNOR.
Foreign income is generally outside the Indian charge while you are RNOR, which can include UK pension income. That does not remove the UK side: UK pension payments may still be taxable in the UK, with the UK-India Double Taxation Agreement determining which country has taxing rights and where relief is claimed. The combination has to be looked at together, not one country at a time.
This is the period to make decisions that would be more expensive later: realising foreign gains, restructuring overseas holdings, deciding whether to take UK pension lump sums, and dealing with UK property. Once ordinary resident status begins, worldwide income and gains come into the Indian charge and foreign asset disclosure obligations apply.
It can. The UK Overseas Transfer Charge turns on tax residency matching the country of the receiving scheme, which is a separate test from RNOR. But your Indian status determines how the resulting income is taxed in India, so the two need to be planned together rather than in sequence.
The RNOR window is easiest to use when it is planned before you move. Book a free discovery call and we will map the years you have.