I am a US citizen and after having lived and worked in the US for over two decades, am considering moving back to India for good. In your earlier columns, I have come across the two-year tax holiday of the resident but not ordinarily resident (RNOR) status. How can I get that status and if I do get it, is only the interest on FCNR deposits tax free or also US income like social security pension and bank interest that I receive every month.
If you have been an NRI for nine out of the ten years prior to moving to India or if you have stayed in India for 729 days or less prior to the financial year in which you come to India, then you would be automatically eligible for the RNOR status. In other words, you do not have to do anything per se, to get this status; your eligibility for the same completely depends upon your satisfying either of the two aforementioned criteria. As you have observed correctly, if you are indeed eligible for the RNOR status, your foreign income including social security pension, bank interest etc remains taxfree for two years. In some cases, the RNOR status may even be available for three years; however, you have to run the numbers for your particular situation to arrive at the same. Though FCNR deposits have to be converted to resident deposits upon arriving in India (this has to be done regardless of whether you get RNOR status or not), interest from these deposits would continue to remain tax-free as long as you are an RNOR.
If you have been an NRI for nine out of the ten years prior to moving to India or if you have stayed in India for 729 days or less prior to the financial year in which you come to India, then you would be automatically eligible for the RNOR status. In other words, you do not have to do anything per se, to get this status; your eligibility for the same completely depends upon your satisfying either of the two aforementioned criteria. As you have observed correctly, if you are indeed eligible for the RNOR status, your foreign income including social security pension, bank interest etc remains taxfree for two years. In some cases, the RNOR status may even be available for three years; however, you have to run the numbers for your particular situation to arrive at the same. Though FCNR deposits have to be converted to resident deposits upon arriving in India (this has to be done regardless of whether you get RNOR status or not), interest from these deposits would continue to remain tax-free as long as you are an RNOR.
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