Residential Status in Taxation – ROR vs RNOR: Complete Guide with Rules & Examples

Returning to India after living overseas for many years can be exciting, but it also comes with its own set of challenges. In addition to personal adjustments, it is important to understand your residential status to plan your finances.

One key area that often gets overlooked is taxation. When it comes to how your income is taxed, you will often come across two terms: ROR (Resident and Ordinarily Resident) and RNOR (Resident but Not Ordinarily Resident).

These classifications play a significant role in deciding how much of your income, especially earnings from abroad, will be taxed in India.

In this guide, we will explain what ROR and RNOR mean, how they differ, and why understanding them is important for your financial planning.

Read: Checklist For Returning Indian NRI -What to Do Before Moving Back

Key Takeaways

• Residential status determines taxation: In India, your tax liability depends on whether you are classified as ROR (Resident and Ordinarily Resident) or RNOR (Resident but Not Ordinarily Resident).
• ROR rules: Requires longer presence in India over past years; RORs are taxed on their global income and must report all foreign assets.
• RNOR rules: Applies to recent returnees or those without sufficient past stay; only Indian income (and India-controlled business income) is taxable, foreign income is generally exempt.
• Key differences: ROR faces full global taxation and asset reporting, while RNOR enjoys temporary tax relief on foreign income and is exempt from reporting overseas assets.

Residential Status – Meaning of ROR and RNOR in NRI Taxation

In NRI (Non-Resident Indian) taxation, ROR and RNOR refer to specific residential statuses under Indian Income Tax law. These classifications determine how a person’s global income is taxed in India. Here’s what they mean:

ROR – Resident and Ordinarily Resident

ROR describes someone who lives in India for most of the year and has been living here regularly over the past few years.

If you qualify as ROR, India taxes your income from all over the world, not just what you earn in India. You also need to tell the tax department about any money or property you have abroad.

RNOR – Resident but Not Ordinarily Resident

RNOR describes someone who lives in India but hasn’t been staying here long enough or regularly enough in the past years.

If you are an RNOR, India only taxes the money you earn in India, and your foreign income is usually not taxed here. Also, you don’t have to report your foreign assets to the tax department.

Residential Status: Rules for Determining ROR and RNOR Status

The following are the rules for determining ROR and RNOR status:

ROR

A person is considered Resident and Ordinarily Resident (ROR) in India if they:

• Stay in India for 182 days or more in a financial year, OR
• Stay in India for 60 days or more in that year and 365 days or more in the past 4 years.
  (For Indian citizens or Persons of Indian Origin visiting India and earning more than INR 15 lakh from Indian sources in that year, the 60-day rule changes to 120 days)

They must also fulfil both of the following additional conditions:

• They were a resident of India for at least 2 out of the last 10 years, and
• They have stayed in India for 730 days or more during the last 7 years

Taxation for ROR:

• Global income is taxable in India.
• Income earned in India and abroad must be declared and taxed in India.
• Eligible for Double Taxation Avoidance Agreement (DTAA) benefits if income is taxed in both countries.

RNOR

A person is classified as Resident but Not Ordinarily Resident (RNOR) if they:

• Qualify as a resident based on the day count (stay at least 182 days in India), but
• Do not satisfy both of the following:
  • Were a resident in at least 2 of the past 10 financial years, and
  • Have spent at least 730 days in India in the past 7 financial years

OR, they are deemed RNOR, if:

• They are Indian citizens or PIOs visiting India
• Their total Indian income exceeds INR 15 lakh in a financial year, and
• They stayed in India for 120-181 days in the relevant year, and are not liable to tax in any other country

Taxation for RNOR:

• Only Indian income and income received or accrued in India is taxable.
• Foreign income is NOT taxable, unless it is derived from a business or profession controlled from India.

Residential Status: ROR vs RNOR: Key Differences You Should Know

The following are the key differences between ROR and RNOR residential statuses:

Parameters	ROR (Resident and Ordinarily Resident)	RNOR (Resident but Not Ordinarily Resident)
Meaning	An ROR is someone who lives in India and has also stayed in the country for a long period over the past several years.	An RNOR is someone who has become a resident but does not meet the long-term stay conditions to be an ROR.
Residency History	The person must have been a resident in at least 2 out of the last 10 financial years and stayed in India for at least 730 days during the last 7 years.	The person is a resident this year, but does not meet the ROR stay conditions.
Tax on Foreign Income	All foreign income is taxable in India.	Foreign income is not taxable in India, unless it comes from a business or profession that is controlled from India.
Tax on Indian Income	All Indian income is fully taxable.	All Indian income is fully taxable.
Reporting Foreign Assets	The person must report all foreign bank accounts, properties and other assets in their Indian tax returns.	The person is not required to report foreign assets in their Indian tax return.

Residential Status – The Key to Taxation  

If you are an NRI planning to return or spend more time in India, it is important to know whether you fall under ROR or RNOR status for tax purposes. You should also keep track of the number of days you have stayed in India and your previous residency. This can help you manage your finances better and save you from unexpected tax issues.

FAQs

Also Read

• The Ultimate Moving Abroad Checklist
• OCI Card For Infants – How To Apply For An Child’s OCI Card
• Indian Entrepreneurs Have New Foreign Destinations In Sight