Resident but not Ordinarily Resident (RNOR): What Does it Mean?

Resident but not Ordinarily Resident (RNOR): What Does it Mean?

Residential status is all important when it comes to income tax. After all, common sense tells us that an Indian who does not live in India can’t be taxed the same as someone who does.

Taxes paid depend on a particular Financial Year, which typically lasts from April 1 to following March 31.

For Financial Year 2018-19, tax for income between April 1, 2018, to March 31, 2019, is paid according to Budget 2018 in the Assessment Year 2019-20.

There are a lot of numbers involved, and we shall attempt to break them down as simply as possible.

Types of residential status

There are three types of residential status recognized by the Income Tax Act 1961 (and amendments thereof). There is Non-resident (NR) as well as Resident (R), which is further broken into two categories: Resident and ordinarily resident (ROR) and Resident but not ordinarily resident (RNOR).

A resident is someone who stays in India and might travel abroad for insignificant periods on business or vacation.

A non-resident is someone who is absent on the whole from India for long durations.

A resident but not ordinarily resident (RNOR) is in between.

Let us explain it in some detail.

Who is a Resident (R)?

A resident is someone in India for 182 days or more in the relevant financial year, OR someone who has stayed in India for 365 days or more in the preceding 4 years prior to the relevant financial year and 60 days in the relevant financial year.

Who is Resident Not Ordinarily Resident (vs. Resident Ordinarily Resident)?

To better understand Resident but Not Ordinarily Resident (RNOR) status, let us first discuss the Resident Ordinarily Resident (ROR) status.

If a citizen of India has satisfied the ROR status in at least 2 out of 10 preceding financial years prior to the relevant financial year, AND he or she has stayed in India for at least 730 days in the preceding 7 financial years prior to the relevant financial year, then he or she is ROR.

Otherwise, he is RNOR.

Someone who is neither is a NR.


Mr. Dilip Khanna has the following days of stay in India.

Assessment Year 2020-21

Previous Year Days of stay in India
1 2019-20 (tax year) 65
2 2018-19 129
3 2017-18 116
4 2016-17 132
5 2015-16 162
6 2014-15 32
7 2013-14 41
8 2012-13 87
9 2011-12 109
10 2010-11 112

Step 1: Was he in India for 182 days in 2019-20?


Step 2: 365 days in 2015-19 and 60 days in 2019-20?

Yes. Though he was not present here for 182 days last year, he was present for 539 days between 2015-2019 and 65 days in 2019-20.

Hence, he is a resident.

But is he ROR or RNOR?

Step 3: Did he fulfill the criteria in 2 out of 10 preceding financial years prior to the relevant financial year?

Yes. In 2019-20 and 2018-19, he fulfilled this condition.


Step 4: Did he stay in India for at least 730 days in the preceding 7 financial years prior to the relevant financial year?

No. He stayed 699 days between 2012-19.

Hence, he is an RNOR.

Why does it matter?

There are three categories of income.

  1. Income received in India (a Swiss national who works for the UN is posted to India and receives his salary through the CitiBank, New Delhi branch)
  2. Income arising in India (A person on an H-1B visa living abroad for the past five years and has never visited India in that time receives a dividend from Infosys worth ₹800,000)
  3. Income arising abroad (A person on H-1B visa living abroad receiving a salary from Amazon in New York)

An ROR can be taxed on all three.

An RNOR cannot be taxed on the third type of income.

Additional Points

This is just an initial primer. The actual application might, at times, be open to legal interpretation.

The description above is accurate, but there remain grey areas, mainly if someone with RNOR status operates or has a controlling stake in a global business with headquarters abroad.

In another variation—say, an Indian actor who mostly stays in Canada—chooses to be paid by the producer at a Montreal bank for working in a Bollywood film. The producer does so from his subsidiary abroad that operates the North American screen distribution.

Cases like these are open to legal interpretations and not cut and dried.

Recent amendments that have come into effect from FY 2020-21 state that the “182 days” criteria is reduced to 120 days for those whose income (other than income earned abroad) is above ₹15 lakhs.

In a significant move towards citizenship-based taxation, there is a further amendment that any citizen of India who is not paying income tax abroad would be liable to pay tax in India if his income exceeds ₹15 lakhs yearly.

Obviously, this is meant to widen the tax base.

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