Under RNOR status, India does not tax your foreign income — meaning your US salary, 401k distributions, US interest income, and foreign capital gains are all India-tax-free for 2-3 years after return.
What is RNOR?
RNOR (Resident but Not Ordinarily Resident) is a special Indian tax residency category available to people who have lived abroad for many years and recently returned to India.
Under RNOR status, India does not tax your foreign income — meaning your US salary, 401k distributions, US interest income, and foreign capital gains are all India-tax-free for 2-3 years after return.
Who qualifies for RNOR?
You qualify as RNOR if you are a "Resident" under Indian law (present in India 182+ days in the current year) AND:
- You were a Non-Resident Indian (NRI) in 9 out of the last 10 years, OR
- You were in India for 729 days or less in the last 7 years
For most H1B holders who spent 8-12 years in the US: you will qualify for RNOR.
RNOR duration
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RNOR typically lasts 2-3 years after you return — depending on exactly how your years count. After that, you become an "Ordinary Resident" and India taxes your worldwide income.
What is and isn't taxed under RNOR
| Income type | RNOR tax treatment |
|---|---|
| Indian salary / business income | ✅ Taxable in India |
| Indian FD interest | ✅ Taxable in India |
| Indian rental income | ✅ Taxable in India |
| US 401k distributions | ❌ NOT taxable in India (foreign income) |
| US brokerage dividends / capital gains | ❌ NOT taxable in India |
| US savings account interest | ❌ NOT taxable in India |
| UK/Singapore income if any | ❌ NOT taxable in India |
The RNOR withdrawal strategy
Optimal 401k withdrawal plan during RNOR window:
- Return to India, establish RNOR status
- Make large 401k withdrawals during years 1-3 of RNOR
- Pay US federal income tax (22-24%) on withdrawals — no India tax
- After RNOR expires: withdrawals become taxable in India too (though India-US DTAA may provide relief)
Example: ₹50 lakh ($60,000) in 401k withdrawals annually during RNOR. US tax at 22% = $13,200. India tax = $0. Net: $46,800 received.
Post-RNOR, same $60,000 would also attract Indian slab-rate tax (~30%) on top. Effective tax jumps from 22% to 35%+.
RNOR filing in India
File Indian ITR-2 (for multiple income sources). Under "Residential Status" select "RNOR." Only Indian-source income goes on the return. Foreign income is noted but not taxed.
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