If you have just returned to India and qualify as Resident but Not Ordinarily Resident (RNOR), your ITR filing is significantly simpler than a full resident's. Most of your foreign income and assets stay out of scope during this window, and there are specific reliefs you can claim that shape how you should file.
This article covers the key questions RNORs have when filing their ITR in India: whether you need to file, which form to use, what income is taxable, and which reliefs are worth claiming.
Table of Contents
- Do I need to file an ITR as an RNOR?
- Which ITR form do I use?
- What income is taxable for an RNOR?
- How is my NRE, NRO, and RFC interest taxed?
- Do I need to file Schedule FA?
- Do I need to file Schedule FSI?
- Can I defer tax on my 401(k), IRA, or foreign pension?
- Which tax regime should I pick?
- Can I claim DTAA benefits?
- Common questions
- About Paasa
Do I need to file an ITR as an RNOR?
Yes, if your total Indian income exceeds the basic exemption limit (₹2.5 lakh under the old regime, ₹4 lakh under the new regime for FY 2025-26).
Filing is also mandatory under other triggers, including high-value deposits, foreign travel spend above ₹2 lakh, electricity bill above ₹1 lakh, or if you want to claim a TDS refund (for example, on NRO interest or capital gains where TDS was deducted at a higher rate than your actual liability).
Confused about your tax residency status? Read our detailed guide on Determining your Tax Residency Status: Resident vs. RNOR vs. Non-Resident.
Note: The Income Tax Act, 2025 came into force on 1 April 2026 and replaces the Income Tax Act, 1961.
However, the ITR for income earned during FY 2025-26 will be filed for AY 2026-27 under the 1961 Act. Returns for FY 2026-27 onwards will be governed by the 2025 Act.
Most rules for RNOR taxation are unchanged between the two Acts, so the answers below apply to both filing years. Section numbers below reference the 2025 Act where they differ from the old one.
Which ITR form do I use?
Most RNORs use ITR-2. This covers salary, capital gains, house property, and other sources. Use ITR-3 if you have business or professional income.
RNORs cannot use ITR-1 or ITR-4, since those forms are restricted to Residents Ordinarily Resident (ROR) only.
What income is taxable for an RNOR?
Three buckets of income are taxable for an RNOR under Section 5(1) of the Income Tax Act:
- Income received or deemed received in India (for example, salary credited to an Indian bank account, rent from Indian property)
- Income accruing or arising in India (for example, capital gains on Indian shares, interest on Indian bank accounts)
- Income accruing outside India from a business controlled from India or a profession set up in India
Everything else, including your foreign salary (if received abroad), foreign rental income, foreign dividends, foreign capital gains, and interest on foreign bank accounts, is not taxable in India during your RNOR years, provided it is received outside India.
Note: If your foreign dividends or sale proceeds land directly in your Indian bank account, they become taxable in India even during RNOR. Receive foreign income in your foreign bank account first, then remit.
For how your Indian capital gains and foreign capital gains are taxed in detail, read our guide on how global stocks and ETFs are taxed for Indian investors.
How is my NRE, NRO, and RFC interest taxed?
Your Indian bank account interest is taxed based on which account it sits in:
- NRE account interest: Taxable once you become RNOR. The NRE exemption applies only to people who are "resident outside India" under FEMA. An RNOR is classified as resident under FEMA from the day your intention to stay in India is established. RBI's FEMA rules also require redesignation of the NRE account as a resident savings account or transfer to RFC.
- NRO account interest: Fully taxable, as it was when you were an NRI. Banks deduct TDS at 30% plus surcharge and cess until you redesignate the account.
- RFC account interest: Exempt as long as you hold RNOR status. Submit an RNOR declaration to your bank to claim TDS exemption. Becomes taxable once you become ROR.
Do I need to file Schedule FA?
No. The ITR-2 instructions state explicitly that Schedule FA need not be filled up if you are Not Ordinarily Resident or Non-Resident.
You do not need to disclose your foreign bank accounts, 401(k) or IRA, foreign property, or foreign shares during your RNOR years. Schedule FA becomes mandatory only once you transition to Resident Ordinarily Resident (ROR).
Read our detailed guide on foreign asset disclosure requirements for RNORs for the full treatment.
Do I need to file Schedule FSI?
In most cases, no.
Schedule FSI captures foreign-source income that is taxable in India. Since most of your foreign income is outside Indian tax scope during RNOR, you will have nothing to report here.
The exception is if you have foreign-source income that IS taxable in India (for example, income from a business controlled from India) and you are claiming foreign tax credit on it.
Can I defer tax on my 401(k), IRA, or foreign pension?
Yes, under Section 89A of the Income Tax Act.
Without this election, India taxes income accruing in your foreign retirement account (US 401(k) and IRA, UK SIPP, Canadian RRSP, and other notified plans) each year as it accrues. The foreign country, however, only taxes on actual withdrawal.
Section 89A lets you defer Indian taxation on these accounts until actual withdrawal, aligning the two countries' treatment. To claim it, you must file Form 10EE before the ITR due date of the first tax year you become resident in India (including your RNOR years). Once chosen, the election cannot be withdrawn.
Note: Form 10EE must be filed in the very first year you become resident in India. If you miss the deadline, you lose the relief for that account permanently.
For the specifics of what happens to your US retirement accounts, read moving back to India from the US.
Which tax regime should I pick?
Both regimes are available to RNORs. The new regime is the default; the old regime remains available on opt-out.
For most RNORs, the new regime is more tax-efficient because it offers a ₹4 lakh basic exemption and wider slabs, and because most RNORs do not have the Indian deductions (80C investments, HRA, home loan interest) that make the old regime worthwhile.
Rebate on income up to ₹12 lakh: Under the new regime for FY 2025-26, income up to ₹12 lakh attracts a rebate of up to ₹60,000, bringing your tax liability to zero. This rebate is available to RNORs (since RNOR is a type of resident) but not to pure NRIs.
Can I claim DTAA benefits?
Yes, where any income is taxable in India and has also been taxed abroad.
Typical cases for an RNOR include foreign income that is taxable in India because it comes from a business controlled from India.
But most RNORs do not need to, because their foreign income is not taxable in India during RNOR years in the first place.
Read our complete guide on filing Form 67 for when and how to file it.
Common questions
What documents do I need to file ITR as an RNOR?
PAN, Aadhaar (linked to PAN), passport with entry and exit stamps as proof of your residential status, Form 16 (if you have any Indian salary), Form 26AS, the Annual Information Statement (AIS), bank statements for all Indian accounts (NRO, NRE, resident savings, RFC), broker statements for Indian investments, TDS certificates, and Form 10EE if you are opting for Section 89A relief.
Does the Black Money Act apply to me as an RNOR?
No. The Black Money Act applies only to Residents Ordinarily Resident. RNORs are outside its scope for undisclosed foreign assets during RNOR years. This changes the moment you transition to ROR.
Can I claim a refund of excess TDS as an RNOR?
Yes. Filing an ITR is the only way to claim refund of TDS deducted on NRO interest, Indian capital gains, or Indian salary that exceeds your actual tax liability. The refund is credited to a pre-validated Indian bank account linked to your PAN.
Do I need to disclose my exempt foreign income anywhere in the ITR?
No. Your foreign salary, rental income, dividends, and capital gains do not need to be reported anywhere in the ITR during your RNOR years, provided they are received outside India.
About Paasa
Paasa is a global investing platform built for Indian residents and returning NRIs. If you are in your RNOR window, Paasa can help manage your foreign portfolio and stay compliant with Indian tax rules.
- Seamless in-kind transfers: Move your existing portfolio from Schwab, Fidelity, Robinhood, or E*TRADE to Paasa without triggering a taxable event, so you stay invested through the transition.
- Cost basis reset during your RNOR window: Paasa helps you identify the right time to sell and repurchase to reset your cost basis before you become an Ordinary Resident.
- Compliance-ready reports: Get the exact tax reports you need for your Indian ITR, including capital gains statements and Schedule FA-ready disclosures for when you transition to ROR.
