I'm moving back to India for good: what happens to my NRE, NRO and FCNR accounts, and will my foreign income be taxed in India?

This guide is for you if you are an NRI (non-resident Indian, the everyday word for an Indian who lives abroad) or a person of Indian origin, and you are coming back to India to settle. For income tax, a person of Indian origin is someone who was born in undivided India, or one of whose parents or grandparents was. The tax rules here are those of the Income-tax Act, 2025, which came into force on 1 April 2026. A tax year that began before 1 April 2026 stays under the older Income-tax Act, 1961.

The guide works through your question in order. First, the two laws that decide what happens to you. Then your accounts. Then tax, year by year, with a worked example.

Two laws, two questions

Moving back changes your “residence” under two different laws. Each asks its own question, and each decides something different for you.

FEMA. FEMA, the Foreign Exchange Management Act, is India’s law on money crossing the border. It asks whether you are a “person resident in India”. On a return to India for employment or a change in residential status, an NRE account should be designated as a resident account. An NRO account may be designated as a resident account when you come back to stay in India for an uncertain period.

Income tax. The Income-tax Act counts in tax years, and a tax year runs from 1 April to 31 March. It gives you one status for each tax year. That status decides which of your income India taxes.

Where the law leaves a point open, the sentence that turns on it carries an “Our reading” label. The label links to both readings, set side by side under “Points of interpretation” at the end of the guide.

The two tests look at different things, so your status under each need not change on the same day. On our reading of FEMA, your accounts may have to change in a year in which, for tax, you are still a non-resident.Our reading

Read across each row to compare the two laws.

When FEMA treats you as resident again

Read word for word, FEMA’s definition starts from a day count: you are a person resident in India if you lived in India for more than 182 days in the previous financial year. The definition then turns on why you have come to India, or why you stay here. Three reasons count:

1. to take up a job in India;
2. to carry on a business or vocation (a trade or calling of your own) in India;
3. for any other purpose that shows you mean to stay in India for an uncertain period.

Put plainly, the three reasons sort people into two groups. If you have come for none of these three reasons, you are not a person resident in India, whatever your day count. If you have come for one of the three, you can be. So the day count is not the whole story: why you have come back matters too.

That leaves one question open: from when? We read FEMA as treating you as a person resident in India from the day you come back for one of those three purposes. The Reserve Bank’s own directions point the same way: they ask for an NRE account to be re-designated as soon as you return to take up a job. The other reading takes the words in order: the 182-day count comes first, so you would stay a person resident outside India until you have spent more than 182 days in India in a financial year that has ended.Our reading

On both readings your accounts change once you are back for good.Our reading The readings differ only on when.

What happens to each account

Each of your accounts ends up in one of two places. One is an ordinary resident rupee account. The other is an RFC (Resident Foreign Currency) account, which keeps your money in foreign currency.

“Re-designated” means designated as a resident account. Our resident account guide explains the resident account it becomes. What NRE, NRO and FCNR(B) do day to day is in our accounts guide.

Your NRE (Non-Resident External) account. When you return to take up a job, or your residential status changes, your NRE account should be designated as a resident account. If you prefer, its money can go into an RFC account instead: the choice is yours.

Your NRO (Non-Resident Ordinary) account. Your NRO account may be designated as a resident account when you come back to stay in India for an uncertain period. Sending NRO money abroad before you return is its own topic, in our NRO repatriation guide.

Your FCNR(B) (Foreign Currency Non-Resident, Bank) deposit. If you are of Indian nationality or origin and come back to settle for good, your bank may let the deposit run until it matures, at the interest rate agreed when you made it. This is at the bank’s discretion, and only if you ask. From the day you return, it is treated as a resident deposit. When it matures, it becomes a resident rupee deposit or, if you are eligible, an RFC deposit, as you choose. Ask your bank whether you qualify. The next paragraph sets out which money goes into an RFC account.

The RFC account. Once your status changes to resident, the money in your NRE account and your FCNR(B) deposit can be moved into an RFC account, so it stays in foreign currency. The Reserve Bank’s directions also let a person resident in India open an RFC account with foreign currency from a set list of sources, such as a pension or other benefits from an overseas employer, or the proceeds of assets you acquired while a non-resident and brought back to India. Money in an RFC account is free of all limits on using foreign currency outside India, so you can hold it and spend it abroad.

The tax on NRE interest. India does not tax the interest on an NRE account while its holder is a person resident outside India under FEMA. That condition stops holding once FEMA treats you as resident, so the exemption does not carry on. How that interest is taxed once you are back is outside this guide; your accountant is the person to set it out for your year.

For tax: one status a year, three possible statuses

Income tax works one year at a time. It decides your status once for each tax year, and you hold that status for the whole year. Next year it is decided again.

There are three statuses. A non-resident is anyone who is not resident in India in that tax year. A resident is either “resident but not ordinarily resident” (RNOR for short) or ordinarily resident. What matters for your foreign income is which of the three you are in each year.

“Deemed”, in the non-resident row, means the Act treats income as received or arising in India by rule, even where that did not happen in fact. For example, salary the Government pays an Indian citizen for work outside India is deemed to arise in India. So the order is: non-resident, then RNOR, then ordinarily resident, with India’s reach over your foreign income growing at each step.

The tests that decide a year

Here is how a year is decided. A tax year makes you resident if any one of the tests below is met, and leaves you a non-resident only if every one fails.

1. The 182-day test: you are in India for 182 days or more in the tax year.
2. The 60-day test: you are in India for 60 days or more in the tax year, and for 365 days or more in total over the four tax years before it. It has an exception for visitors, set out just below.
3. Deemed residence: a rule for some Indian citizens whose income other than from foreign sources is above Rs 15 lakh. “Income from foreign sources” is explained just below; the rule itself, under “Where you are coming from”.

The visitor exception. For an Indian citizen or a person of Indian origin who, being outside India, comes on a visit, the 60-day test does not apply, so only the 182-day test decides. The 60-day test comes back for a visitor whose income other than from foreign sources is above Rs 15 lakh in the tax year, with 120 days in place of 60. Whether the year you come back to live counts as a visit is open; it is taken up under “The year you come back, and why the date matters”, below.

Income from foreign sources. “Income from foreign sources” means income that arises outside India and is not deemed to arise in India, other than income from a business controlled in India or a profession set up in India. So the Rs 15 lakh is counted on the rest of your income: income that arises in India or is deemed to, and foreign income from a business controlled or profession set up in India. Salary for work you do in India is one example: the Act treats it as earned, and so arising, in India.

How to count a day. The Act sets no rule for part days. We count any part of a day in India as a day, so the day you arrive and the day you leave both count. When you are close to a limit, count both days.Our reading

The year you come back, and why the date matters

The year you come back is the first year these tests are run on you as a returner. To see how they work, take one person.

Why does the table show two readings of the 60-day test? Whether the visitor exception covers the year you come back to live is open. We read it as covering trips while your home is still abroad, not the journey on which you come back to live, so the 60-day test applies in full that year. The other reading: you were outside India when you travelled back, so that year still counts as a visit, and the 60-day test does not apply.Our reading

The late return. Arjun has 138 days in India in 2027-28, under 182, so the 182-day test is not met. He was in India for only 120 days over the four years before, under 365, so the 60-day test fails even if it applies. Every test fails, so on both readings 2027-28 is a non-resident year for him.

If you spent more time in India over those four years, the reading matters. On our reading, 60 days or more in the year of return can make it a resident year, even with fewer than 182.Our reading So count your days over the four years before, not only this year’s.Our reading

The early return. Landing on 1 June gives Arjun 305 days in India in 2027-28, which crosses 182, so the year is a resident year on either reading. Whether that resident year is RNOR or ordinarily resident is the next test, and Arjun, abroad for years, meets it. Someone who was abroad for only a few years, and lands early enough to be in India for 182 days or more, may meet neither look-back, and would then be ordinarily resident straight away.

RNOR is tested again every year

The two look-backs. You are RNOR in a tax year if you are resident that year and at least one of these two look-backs holds:

• Nine of ten: you were a non-resident in nine of the ten tax years before it.
• 729 days in seven: you were in India for 729 days or less in total over the seven tax years before it.

Two further cases. A citizen of India or person of Indian origin whose income other than from foreign sources is above Rs 15 lakh in the tax year, and who is in India for 120 days or more but less than 182 in that year, is RNOR for that year. So is an Indian citizen who is deemed resident for the year (see “Where you are coming from”).

The windows slide. The test is run again for every tax year, on the years just before that one. So both look-back windows slide forward one year at a time. Each year you live in India adds a resident year to the ten-year window, and a full year of days to the seven-year window. The first resident year in which both look-backs fail, and neither further case applies, is your first ordinarily resident year.

Here is Arjun’s late return, year by year. Each row is one tax year, with the windows it looks back over.

Reading the rows. In 2027-28, his year of return, Arjun is a non-resident, so the look-backs are not needed. In 2028-29 and 2029-30 he is resident and both look-backs still hold, so he is RNOR. His days in the seven-year window are 318 for 2028-29 and 653 for 2029-30, both 729 or less. In 2030-31 the ten-year window holds two resident years and the seven-year window 988 days, more than 729, so both fail: 2030-31 is his first ordinarily resident year, after 2 RNOR years.

The early return, year by year. Had Arjun landed on 1 June 2027, 2027-28 would already be a resident year, so the whole count moves a year sooner. Here are the workings.

Both landings give Arjun 2 RNOR years; landing early moves them, and his first ordinarily resident year, a year sooner. The count runs on your own years and days, so it is not the same for everyone: as “The early return” above shows, someone abroad for only a few years may meet neither look-back at all. Work it through year by year from your own records.

The limit of the RNOR shelter

What the shelter covers. The RNOR limit applies only to income that arises outside India. That foreign income is taxed in India only when it comes from a business controlled in India or a profession set up in India. Income you receive in India still counts in an RNOR year even if it arose abroad, and so does income that arises in India.

Overseas work you keep running. Where that line falls is a question of fact, and the Act gives no bright line. The hard case is overseas work you keep running from India after you return, such as consulting: whether its control or its set-up has moved to India depends on your facts. Take professional help on your own case.Our reading

If you are salaried. The Act treats salary for work you do in India as earned in India, and so as arising in India. So a salary for a job you do in India counts in your income in India whatever your status, and the RNOR shelter does not reach it.

Once you are ordinarily resident

Once you are ordinarily resident, India taxes all your income, wherever it arises. That is the widest of the three statuses.

There is a filing duty too. From that year, if at any time in the year you hold an asset outside India, or can sign on an account outside India, you must file an Indian income-tax return for the year, whatever your income. So if you keep a bank account in the country you left, this duty starts with your first ordinarily resident year.

If the same income is taxed in two countries, our DTAA guide explains how a tax treaty deals with it. How becoming resident changes the tax on your Indian investments is its own topic, in our investment tax guide.

Where you are coming from

The UAE. An Indian citizen who is not liable to tax in any other country because of domicile (broadly, the country you treat as your permanent home), residence or similar criteria, and whose income other than from foreign sources is above Rs 15 lakh in the tax year, is deemed resident in India for that year. This rule never applies in a year the day tests already make you resident. A citizen who is deemed resident this way is RNOR for that year, not ordinarily resident. The UAE has a Corporate Tax, but no tax on individuals’ income to match it. Its Corporate Tax does not apply to your salary or other employment income, or to income from investments you make in your own personal capacity, not through a licence or in a way that needs one. So neither tax reaches a salary like yours. Whether living in the UAE counts as “not liable to tax” for this rule is an open question. We read the Act’s words as not settling it, so the answer turns on your own tax position abroad in the year you move.Our reading Whatever the answer, the rule needs your income other than from foreign sources to be above Rs 15 lakh in the tax year; at or below that, it does not reach you.

The US. If you are a US citizen or a US resident alien, the US taxes your income from all sources worldwide, so your foreign income is generally still taxable in the US whatever your status in India. So “not taxed in India” is not the same as “not taxed anywhere”. US reporting is a topic of its own.

The UK. If you were a UK resident, the UK side of your move is decided by HM Revenue & Customs’ Statutory Residence Test, which works out your UK status for each tax year. The year you move may be split into a UK part and an overseas part, which the UK calls “split-year treatment”.

Before you move

• Ask your bank about re-designating your NRE and NRO accounts as resident accounts once you are back to live.
• Decide whether your NRE money becomes resident rupees or moves to an RFC account in foreign currency.
• Decide whether to ask your bank to let your FCNR(B) deposit run to maturity.
• Count your days in India in the tax year you come back, and over the four tax years before it, as set out under “How to count a day”.
• Keep a record of your years abroad and your days in India each year: the RNOR look-backs reach back ten tax years.
• From your first ordinarily resident year, file an Indian return if you still hold anything abroad.
• Ask your accountant about the tax for the year you come back before you file.

In short, two laws decide what happens to you, and your status under each need not change on the same day. When you return for employment or your residential status changes, your NRE account should be designated as a resident account, or its money may instead go to an RFC account, at your option. Tax follows the Income-tax Act, one year at a time, from your days in India. After you come back, you stay RNOR while one of the two look-backs holds, and you can count that yourself from your own years.

When you are ready, we will answer your question and take you through this guide. Your bank is the place to ask about your accounts, and your accountant about the tax for each year. One question is enough to start: type it into the “Ask Rohit” question box on this page.

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