RNOR for UK NRIs Returning to India (2026)

A Deep-Dive Tax Guide with Case Study and Numeric Comparison

For NRIs returning to India from the United Kingdom, RNOR (Resident but Not Ordinarily Resident) plays a very different role compared to the US or Canada.

RNOR does not eliminate UK tax retroactively.
RNOR does not override the UK’s Statutory Residence Test.

What RNOR does provide for UK NRIs is tax sequencing, containment, and protection against premature Indian taxation, especially in split-year and post-exit scenarios.

This article explains RNOR specifically from a UK perspective, with a realistic, fact-checked case study.

Why UK NRIs Need a Separate RNOR Analysis

UK tax outcomes differ materially because:

• The UK uses the Statutory Residence Test (SRT)

• The UK allows split-year treatment

• There is no exit tax like Canada

• Capital gains and income may be taxed up to the date of departure

• India–UK DTAA focuses on credit and allocation, not exemption

RNOR planning for UK NRIs is therefore about timing, split-year optimisation, and preventing early Indian tax exposure.

RNOR Recap (UK-Relevant Only)

RNOR is a temporary Indian tax status available to certain returning NRIs.

During RNOR:

• Foreign income earned and received outside India is generally not taxable in India

• Foreign assets are generally not reportable in India

• Indian income remains fully taxable

RNOR typically lasts 1–3 financial years, depending on past Indian residency.

How the UK Determines Tax Residency

The UK uses a Statutory Residence Test (SRT), which consists of:

Automatic Overseas Tests

You are non-resident if:

• You were UK-resident in one of the previous 3 tax years and spend <16 days in the UK, or

• You were not UK-resident in the last 3 years and spend <46 days in the UK

Automatic UK Tests

You are resident if:

• You spend 183+ days in the UK, or

• You have a UK home and live there sufficiently

Sufficient Ties Test

If neither automatic test applies, residency depends on:

• Family ties

• Accommodation

• Work

• Days spent in the UK

This structure allows clear planning, unlike Canada.

Split-Year Treatment (Critical for RNOR Planning)

The UK allows split-year treatment, meaning:

• Part of the year is taxed as UK resident

• Part is taxed as UK non-resident

Common split-year cases include:

• Leaving the UK to work full-time abroad

• Ceasing UK home and residence permanently

Split-year treatment is a major advantage for UK NRIs.

What RNOR Actually Solves for UK NRIs

RNOR does not remove UK tax for the UK-resident portion of the year.

RNOR helps by:

1. Preventing India from taxing foreign income immediately after return

2. Avoiding dual taxation during split-year transitions

3. Allowing post-exit foreign income to remain untaxed in India

4. Delaying foreign asset reporting in India

5. Simplifying DTAA credit mechanics

RNOR complements UK split-year rules — it does not replace them.

Case Study: UK → India Return

Profile

• Indian citizen

• Lived and worked in the UK for 6 years

• Returning permanently to India

• No UK property retained

Assets at Time of Return

(Assumed FX rate: 1 GBP ≈ ₹105, conservative)

Timeline & Tax Treatment

Year of Return (Split-Year)

UK

• UK-resident until departure

• UK tax applies on:

  • Salary and gains up to exit date

• Post-exit income not taxed in the UK

India

• Individual spends >182 days

• Becomes Indian tax resident

• Qualifies as RNOR

RNOR Period in India (2 Years)

India

• Foreign income not taxable

• Foreign assets not reportable

• Indian income taxable normally

UK

• No longer tax resident

• No UK tax on post-exit income

Numeric Tax Comparison: With vs Without RNOR

Assumptions

• FX rate: 1 GBP = ₹105

• Unrealised gains in portfolio: 35%

• UK CGT rate: 20%

• Indian marginal tax rate: ~31.2%

• RNOR window: 2 years

Asset & Income Snapshot

Scenario 1: With RNOR

UK Tax

• Gains taxed up to exit date

• No exit tax beyond realised gains

India Tax During RNOR

• Foreign income: ₹0

• No foreign asset reporting

Total Tax (Illustrative)

• UK CGT: ~₹14.7 lakh

• India tax on foreign income: ₹0

Total: ₹14.7 lakh

Scenario 2: Without RNOR

UK Tax

• Same as above

India Tax on Foreign Income

• ₹15.75 lakh × 2 years × 31.2%

• ≈ ₹9.8 lakh

Total Tax

• ₹14.7 lakh + ₹9.8 lakh

• ₹24.5 lakh

RNOR Impact

RNOR prevents India from taxing post-exit UK income during the transition window.

RNOR vs No RNOR for UK NRIs

Common Mistakes UK NRIs Make

• Missing split-year eligibility

• Selling assets at the wrong time

• Becoming ROR too early

• Triggering Indian reporting prematurely

• Assuming DTAA alone is sufficient

Most of these mistakes permanently reduce RNOR value.

Final Takeaway

For UK NRIs, RNOR is a timing and sequencing tool, not a tax escape route.

Used correctly, RNOR:

• Complements UK split-year rules

• Prevents premature Indian taxation

• Simplifies DTAA application

• Smoothens the transition back to India

Once the RNOR window closes, it cannot be reopened.