NRI Status in India | Explained by DBS Treasures

NRI Status: Simplifying the Transition for Returning Indians

12 Sep 2025

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Reading time: 4 minutesKey TakeawaysNon-resident Indians (NRIs) returning to India on a permanent basis should prepare themselves for change. The rules are very different for resident Indians, and while adaptation may seem easy, there is always something new that can be learned.IntroductionBidding goodbye to your NRI status after returning to India and also to the tax benefits that came along with it will not be easy. After you become an Indian resident, the income-tax rules governing your earnings, investments, savings and finances would change dramatically. So how should NRIs plan their return? And when does NRI status expire? Here are the answers to some of your questions:Who is an NRI?An NRI is a person of Indian origin/Indian citizen who stays outside India for the purpose of employment, or for carrying on business or vocation outside India, or for any other purpose indicating his intention to stay outside India for an uncertain period.But it does not simply end there. The NRI status of a person mainly depends on the period of his/her stay in India. The Income Tax Act 1961 does not directly define an NRI, but the Section 6 contains detailed criteria of who is considered a resident of India. Therefore, anyone who does not meet that criteria can be called an NRI.As per the Income Tax Act, 1961, an individual can be treated as an NRI in any given financial year if he/she is:1) Present in India for less than 182 days during that fiscal year, or2) Present in India for less than 365 days cumulatively during the preceding four fiscal years and less than 60 days during that fiscal year.The Finance Bill 2020 passed by the Parliament in March 2020 made a slight but important change to these rules with effect from 1 April 2020. According to the new rules, the period of ‘182 days’ has been reduced to ‘120 days’ for those NRIs whose income accruing or arising in India is more than Rs 15 lakh during that fiscal year.Hence, if you are an NRI⁽¹⁾ whose total taxable income from India is more than Rs 15 lakh, staying in the country for more than 119 days in a fiscal year is not enough to protect your NRI status. This also makes you susceptible to taxation in the country.However, if your total taxable income in India is less than Rs 15 lakh during any financial year, your stay can go till 181 days, as was the case earlier.Long-term financial plans on your mind? Choose DBS TreasuresJoin DBS TreasuresHow does NRI status change when a person returns to India?NRIs returning to India permanently would lose their NRI status depending on the total time they spend in India during the year of their return.So if you return after October in a given fiscal year, you can still qualify as an NRI for that year as you will be staying for less than 182 days in India. If you return before October, you would lose the NRI status in the same year.After losing the NRI status, returning NRIs either become resident but not ordinarily resident (RNOR), or resident and ordinarily resident (ROR) Indians.RNOR is essentially a transitional residential status given to returning NRIs before they become an ordinary resident of India (ROR).NRIs coming back to India qualify as an RNOR for any fiscal year only if:1) They have been an NRI in 9 out of 10 years preceding the fiscal year under consideration, or2) They have been in India for no more than 729 days during the preceding seven years, or3) If they are not a tax-resident⁽²⁾ in any other country, and their Indian Income exceeded Rs 15 lakh in the previous year with their stay in India ranging from 120 days to 181 days that year.If NRIs don’t fulfil any one of these conditions, they directly become ordinary residents.Tax Status on NRI Returning to IndiaNRIs returning to India may lose their NRI status in the same year of return, but can continue to enjoy the tax breaks for a few more years as RNOR Indians.That’s because RNORs are treated on par with NRIs for Indian income tax purposes. Like NRIs, RNORs are also taxed only to the extent of income ⁽³⁾earned in India and are not liable for taxation on income earned abroad. Hence, your foreign income won’t be taxed in India as long as you qualify as an RNOR.However, over time, you will lose your RNOR status as you will not be able to meet any of the conditions mentioned above for being an RNOR Indian.That’s the time when you will move out from the RNOR category and become an ROR or ordinary resident. After you become an ordinary resident, all your global income will be taxed in India as per the Income Tax Act, 1961.Notifying the bank before returnThe onus of informing banks about your return to India lies with you. The Reserve Bank of India says that NRIs ⁽⁴⁾moving back to India must immediately inform their banks about the change in their residential status within a reasonable period of time. This would prompt the bank to convert all NRI accounts into resident accounts.Failure to do so would be considered a violation of the Foreign Exchange Management Act (FEMA) and would attract penalties liable to be paid by returning NRIs.To notify the bank, you can either visit any branch of the bank across India and submit a declaration along with needed documentary proofs. Or, you can get in touch with your relationship manager and initiate the process.Financial tips for NRIs returning to IndiaIt is important for NRIs coming back to India to make certain financial changes in order to comply with the Indian tax laws: Here are some useful tips ⁽⁵⁾ for NRIs returning to India:

Changing status of bank accounts: You should redesignate your NRO or NRE account after returning to India as a domestic resident account. You can also transfer the balance in your NRE/FCNR account to a resident foreign currency (RFC) account if you want to maintain your funds in a foreign currency.

Status of NRE FD after return to India: If you are holding an NRE FD, it would be converted into a domestic resident FD account without changing the promised rate of interest. But the interest earned would become taxable as per your income tax slab.

Status of FCNR deposits: If you have an FCNR deposit, you can maintain it until maturity. After that, you will have to convert it into a resident rupee deposit account or a resident foreign currency account if you wish to continue holding the foreign currency.

Mutual funds/stocks investment: If you had invested in mutual funds in India as an NRI, you must inform your bank about the change in your residential status. Also, if you had invested in stocks, you would have to close your portfolio investment services (PIS) account and open a normal trading and Demat account meant for resident Indians.

Insurance: The insurance policy bought in a foreign country will not cover you in India. So, after your return, you will have to buy a good health and life insurance policy that provides comprehensive coverage to you and your family.

Final NoteTiming your return to India is the key to ensuring that you enjoy the privileges associated with being an NRI for as much time as possible. Make the right choices and you will be able to take advantage of your privileges for a longer period of time.DBS Treasures offers a comprehensive suite of investment products for NRIs to invest in India. Opening an NRI Savings Account can further simplify your transition by ensuring smooth fund management, compliance with FEMA regulations, and convenient access to both domestic and international banking services. Know more.Join DBS Treasures*Disclaimer: This article is published purely from an information perspective and it should not be deduced that the offering is available from DBS Bank India Limited or in partnership with any of its channel partners.The purpose of this blog is not to provide advice but to provide information. Sound professional advice should be taken before making any investment decisions. The bank will not be responsible for any tax loss/other loss suffered by a person acting on the above.