A software engineer client returned from London after 12 years. She continued receiving her UK pension and had capital gains from UK equity investments.
During her RNOR window, she saved over ₹9 lakh in taxes because her UK income wasn't taxed in India.
That's the power of RNOR status when used correctly.
RNOR (Resident but Not Ordinarily Resident) is your golden window after returning to India. For UK returnees specifically, this 2-3 year period offers unique advantages because of how the India-UK DTAA interacts with Indian tax law.
This guide explains exactly how UK NRIs can maximize tax savings during their RNOR years.
What Exactly Is RNOR Status?
RNOR stands for Resident but Not Ordinarily Resident. It's a transitional tax category designed for Indians returning after living abroad for extended periods.
Think of it as a financial soft landing. You're technically a resident for FEMA purposes (banking and compliance), but you enjoy NRI-like tax treatment on foreign income.
The core benefit: Your foreign income stays tax-free in India during RNOR years.
This includes UK rental income, UK pension payments, dividends from UK stocks, interest from UK bank accounts, and capital gains from selling UK assets.
👉 Tip: RNOR status isn't automatic. You must determine your eligibility and declare correctly while filing your ITR.
How UK NRIs Qualify for RNOR Status
To become RNOR, you must first be a "resident" under Indian tax law. This typically means staying in India for 182 days or more during a financial year.
Once you're a resident, you qualify as RNOR if you meet either of these conditions:
Test 1: The 9-out-of-10 Rule
You were an NRI in at least 9 of the past 10 financial years.
Example: You left India in 2013 and returned in 2025. You were NRI for 12 years. You automatically qualify for RNOR.
Test 2: The 729-Day Rule
Your total days in India across the 7 financial years preceding the current year were 729 days or less.
Example: You lived in London but visited India for holidays. If your cumulative India visits from FY 2018-19 to FY 2024-25 total less than 730 days, you qualify.
Most UK NRIs returning after 10+ years will easily meet the first condition and qualify for RNOR for 2-3 years.
Use our Residential Status Calculator to check your exact eligibility.
How Long Does RNOR Status Last?
RNOR isn't permanent. It's a transitional phase that typically lasts 2-3 financial years.
The duration depends on how long you were abroad:
Years Abroad | Typical RNOR Duration |
|---|---|
5-7 years | 1 year |
8-10 years | 2 years |
10+ years | 2-3 years |
Once you fail both qualifying tests, you become ROR (Resident and Ordinarily Resident), and your global income becomes taxable in India.
Example: Mr. Sharma lived in the UK for 15 years. He returned to India in January 2025. He qualifies as RNOR for FY 2024-25, FY 2025-26, and potentially FY 2026-27. By FY 2027-28, he becomes ROR.
👉 Tip: Calculate your RNOR window precisely. Every year matters when planning asset sales and repatriation.
What Income Stays Tax-Free During RNOR?
This is where RNOR becomes powerful for UK returnees. During your RNOR period, only the following income is taxable in India:
- Income received in India
- Income accruing or arising in India
- Income from a business or profession controlled/set up in India
Everything else – your foreign income – remains tax-free in India.
Tax-Free Income for UK Returnees During RNOR
Income Type | Tax Status |
|---|---|
UK rental income | Tax-free (if kept outside India) |
UK pension payments | Follow DTAA rules (often UK-taxed only) |
UK stock dividends | Tax-free (if not remitted) |
UK bank interest | Tax-free |
Capital gains from UK property sale | Tax-free |
Capital gains from UK stocks | Tax-free |
Indian salary | Fully taxable |
Indian rental income | Fully taxable |
Indian FD interest | Fully taxable |
The critical distinction: Foreign income that accrues and is received outside India is not taxed for RNORs.
👉 Tip: If you receive UK rental income in your UK bank account (not transferred to India), it remains tax-free during RNOR. But if you transfer it to your Indian account, it becomes "received in India" and may attract tax.
UK Pension During RNOR: Special Rules
Your UK pension treatment during RNOR depends on the pension type and how the India-UK DTAA applies.
NHS and Government Pensions
Government service pensions (like NHS) have special treatment under the DTAA. Under Article 19, government pensions are typically taxable only in the country that pays them – meaning the UK.
Practical tip: Apply for an NT (No Tax) code from HMRC to prevent UK tax deductions if you're entitled to DTAA benefits.
Private Workplace Pensions
Private workplace pensions are generally taxable in your country of residence. Once you're resident in India, these may fall under Indian taxation after your RNOR period ends.
RNOR advantage: During RNOR years, private pension income received in the UK (not transferred to India) remains tax-free in India.
UK State Pension
You can receive UK State Pension in India. You need 10 qualifying years of National Insurance contributions. The State Pension follows specific DTAA rules and may be taxable in both countries, but you can claim Foreign Tax Credit.
Real case: Meera, a financial consultant, returned from London with a UK pension. Using DTAA provisions combined with RNOR status optimization, her UK pension remained taxed only in the UK – saving ₹3.2 lakhs annually.
Read more about pension income tax rules for NRIs retiring in India.
Strategic Timing: When Should You Return?
The timing of your return significantly impacts your RNOR benefit window.
Return Early in Financial Year (April-June)
You'll spend most of the first financial year as resident, giving you one full RNOR year immediately.
Return Late in Financial Year (February-March)
You'll spend only 1-2 months in India that year. You may remain NRI for that year and become RNOR starting the next financial year – potentially giving you an extra year of tax benefits.
Example:
If you return on December 1, 2025, you'll be in India for about 120 days (Dec-March). Since this is less than 182 days, you remain NRI for FY 2025-26. You become RNOR from FY 2026-27 onwards.
If you return on March 31, 2025, you'll be RNOR for both FY 2024-25 and FY 2025-26, maximizing your tax-free window.
👉 Tip: If you have significant UK assets to liquidate, time your return to the end of financial year to maximize RNOR years for tax-free asset sales.
5 Smart Tax Planning Strategies for UK Returnees During RNOR
Strategy 1: Sell UK Property During RNOR
Capital gains from selling UK property are tax-free in India during your RNOR period (provided the sale proceeds aren't immediately remitted to India).
If you were planning to sell your London flat anyway, doing it during RNOR means:
- UK capital gains tax applies (18% or 24% for residential property)
- No additional Indian capital gains tax
- After RNOR ends, you'd pay Indian tax on top of UK tax (with DTAA credit, but still higher outflow)
Action: List properties for sale within your first RNOR year. Even if sale completes in year 2, you're still within the window.
Read about NRI capital gains tax rules.
Strategy 2: Liquidate UK Stocks and ISAs
Your UK ISA loses its tax-free status the moment you become an Indian tax resident. ISA income becomes taxable in India.
But during RNOR, capital gains from UK stocks remain tax-free in India.
Smart move: If you were holding UK stocks waiting for the right time to sell, your RNOR period is that time. Sell, realize gains, and transfer to RFC accounts in India for currency flexibility.
Strategy 3: Withdraw from UK Pension Accounts Strategically
During RNOR years, pension withdrawals kept in UK accounts aren't taxed in India. The UK will apply its rules (typically 75% tax-free lump sum, 25% taxable for certain pension types).
After becoming ROR, pension withdrawals may attract Indian tax based on DTAA provisions.
Planning tip: If you're over 55 and can access pension lump sums, consider partial withdrawals during RNOR to minimize overall tax burden.
Strategy 4: Repatriate Funds via RFC Accounts
When you return, convert your NRE account to an RFC (Resident Foreign Currency) account. RFC accounts let you hold foreign currency (GBP, USD, EUR) even as a resident.
Why this matters during RNOR:
- Interest earned on RFC accounts is tax-free during RNOR
- You maintain GBP exposure without forced INR conversion
- Funds remain freely repatriable if you ever move abroad again
One client saved ₹10.39 lakh in taxes over 2 years by using RFC accounts strategically during his RNOR period.
Strategy 5: Keep UK Rental Income in UK Bank Account
If you retain UK property for rental income, keep the rent in your UK bank account during RNOR years.
Once it reaches your Indian account, it's "received in India" and may attract tax. Keeping it offshore during RNOR means:
- No Indian tax during RNOR
- UK tax applies (often 20% for non-residents under NRLS)
- Transfer to India after RNOR only when needed
Important: After RNOR ends and you become ROR, UK rental income becomes taxable in India regardless of where it's received. Plan your transfers accordingly.
Year-by-Year RNOR Tax Planning Calendar
Here's a practical timeline for UK returnees:
6 Months Before Return
- Calculate your expected RNOR duration
- List all UK assets (property, stocks, pensions, bank accounts)
- Decide what to sell vs. retain
- Consult a cross-border tax advisor
Year 1 (RNOR)
Priority: High-value asset sales
- Sell UK property if planned
- Liquidate UK stocks you don't want to hold
- Withdraw accessible pension lump sums
- Convert NRE accounts to RFC accounts
- Keep UK rental income in UK accounts
Tax filing: File ITR-2 declaring your RNOR status. Indian income is taxable; foreign income (not received in India) is exempt.
Year 2 (RNOR)
Priority: Continued optimization
- Complete any remaining asset sales
- Transfer funds to India via RFC as needed
- Build Indian investment portfolio (PPF, ELSS, NPS now available)
- Plan for ROR status transition
Tax filing: Continue filing as RNOR. Use Form 67 for foreign tax credits if applicable.
Year 3 (Likely ROR)
Priority: Compliance and restructuring
- Global income now taxable in India
- Report all foreign assets in Schedule FA of ITR
- Claim DTAA benefits on foreign income
- Consolidate foreign accounts to simplify compliance
👉 Tip: Use our Compliance Compass to ensure you're meeting all RBI and tax requirements during this transition.
UK-India DTAA: Your Second Layer of Protection
Even after RNOR ends, the India-UK DTAA continues protecting you from double taxation.
Key DTAA Benefits for UK Returnees
Reduced TDS Rates:
Income Type | Standard Rate | DTAA Rate |
|---|---|---|
Interest | 30% | 15% |
Dividends | 20% | 10% |
Royalties | 30% | 15% |
Foreign Tax Credit: Tax paid in UK can be claimed as credit against Indian tax on the same income.
Pension Protection: Certain pensions remain taxable only in the UK even after you become ROR.
Documents Required for DTAA Benefits
- Tax Residency Certificate (TRC) from HMRC
- Form 10F filed electronically on Indian tax portal
- PAN card copy
- Self-declaration of no Permanent Establishment in India
Learn more about how to claim DTAA benefits.
Common RNOR Mistakes UK NRIs Make
Mistake 1: Miscalculating Residential Status
Even a 1-day miscalculation can change your tax status. Track every India visit meticulously using passport stamps.
Fix: Maintain a spreadsheet of all India entries and exits for the past 10 years.
Mistake 2: Transferring All Funds to India Immediately
Rushing to transfer UK savings to Indian accounts can trigger unnecessary tax liability.
Fix: Use RFC accounts. Transfer funds gradually based on actual needs.
Mistake 3: Not Informing Banks About Status Change
Continuing NRE accounts after becoming resident violates FEMA rules. Banks can freeze accounts.
Fix: Notify banks within 30 days of return. Convert accounts as required.
Read our guide on what happens to NRI accounts when you return.
Mistake 4: Assuming RNOR Exempts All Income
RNOR doesn't exempt Indian-sourced income. Your Indian salary, rental income from Indian property, and Indian FD interest are all fully taxable.
Fix: Understand that RNOR benefits apply only to foreign income not received in India.
Mistake 5: Ignoring UK Tax Obligations
Just because you've left the UK doesn't mean UK tax obligations end. Non-Resident Landlord Scheme, pension taxation, and CGT on UK assets still apply.
Fix: Work with tax advisors in both countries for the first 2-3 years.
What Happens After RNOR Ends?
Once you become ROR (Resident and Ordinarily Resident), your tax situation changes significantly:
Global Income Becomes Taxable
All worldwide income – including UK rental income, foreign dividends, and overseas bank interest – must be declared and taxed in India.
Foreign Asset Reporting Required
You must disclose all foreign assets in Schedule FA of your ITR, including:
- Foreign bank accounts
- Foreign property
- Overseas investments
- Foreign insurance policies
Non-disclosure attracts penalties under the Black Money Act – up to ₹10 lakh or 300% of tax evaded.
DTAA Becomes Critical
After RNOR, DTAA provisions become your primary protection against double taxation. Ensure you claim foreign tax credits using Form 67.
Case Study: Optimizing RNOR for Maximum Savings
Profile: Priya, 45, IT professional returning from London after 14 years
UK Assets:
- London flat worth £400,000 (with £150,000 capital gain)
- UK stocks worth £50,000 (with £20,000 gains)
- NHS pension (ongoing)
- UK bank savings: £80,000
Return Date: March 15, 2025
RNOR Duration: 3 years (FY 2024-25, FY 2025-26, FY 2026-27)
Strategy Implemented:
Year 1 (FY 2024-25):
- Remained NRI (less than 182 days in India)
- Sold London flat – paid UK CGT only (24% on £150,000 = £36,000)
- No Indian tax on capital gains
Year 2 (FY 2025-26) – First RNOR Year:
- Sold UK stocks – no Indian tax on gains
- Transferred £100,000 to RFC account
- Kept NHS pension in UK account
- Indian tax: Only on Indian salary
Year 3 (FY 2026-27) – Second RNOR Year:
- Continued receiving NHS pension in UK
- Transferred remaining UK funds as needed
- Started PPF, NPS, and ELSS investments
Total Tax Savings: ₹14.5 lakhs (compared to returning without RNOR optimization)
Building Your India Portfolio During RNOR
While managing your UK assets, start building your Indian investment portfolio. As a resident, you now have access to:
Tax-Saving Investments Under Section 80C
- PPF: 7.1% tax-free returns, ₹1.5 lakh annual limit
- ELSS: Equity mutual funds with 3-year lock-in
- NPS: Additional ₹50,000 deduction under 80CCD(1B)
Mutual Funds
As a resident, you have unrestricted access to all Indian mutual funds. Start SIPs in diversified equity funds for long-term wealth creation.
Read our guide on how NRIs can invest in mutual funds.
GIFT City Investments
Even after becoming resident, you can maintain USD exposure through GIFT City fixed deposits. These offer tax-efficient, dollar-denominated returns.
Compare GIFT City FD vs NRE/NRO/FCNR to understand your options.
Your RNOR Action Plan
The RNOR window is time-limited. Here's your immediate to-do list:
This Week:
- Calculate your expected RNOR duration using our Residential Status Calculator
- List all UK assets and income sources
- Decide your return date strategically
This Month:
- Consult a cross-border tax advisor
- Begin UK property sale process if applicable
- Apply for TRC from HMRC if you'll need DTAA benefits
Before Return:
- Notify UK banks about your move
- Set up RFC account conversion process with Indian bank
- Document all passport entries for past 10 years
Final Thoughts
RNOR status is one of the most valuable tax benefits available to returning NRIs. For UK returnees specifically, the combination of RNOR exemptions and India-UK DTAA provisions can save lakhs in taxes.
But benefits don't come automatically. You need to understand the rules, plan strategically, and execute within the 2-3 year window.
The clients I've seen succeed are those who start planning 6-12 months before return. They know exactly which assets to sell, when to transfer funds, and how to structure their finances for minimum tax impact.
Don't leave money on the table. Use your RNOR years wisely.
Need help navigating your return? Join our WhatsApp community where UK and UAE NRIs share experiences and strategies.
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Our tools like the NRI FD Rate Comparison and Compliance Compass are designed specifically for NRIs managing cross-border finances.
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