Difference between NRI vs. RNOR status for tax purposes

[hvn2hm]

Dear Finance Gurus,

Is there a difference between being an NRI or an RNOR for a USC during any given year. Depending on my date of return 08/2010 or 10/2010, I will have RNOR status for the first three years or NRI (1st year) + RNOR (2nd and 3rd years) respectively. Are the two scenarios effectively the same for Indian tax purposes. My naive understanding is that this does not have any impact on US taxes.

I tried searching an answer for this on this forum without much success. Apologies if this has already been discussed and much appreciated if someone can direct me to the thread/post.

Thanks in advance

[bmukherji]

Dear Finance Gurus,
Is there a difference between being an NRI or an RNOR for a USC during any given year. Depending on my date of return 08/2010 or 10/2010, I will have RNOR status for the first three years or NRI (1st year) + RNOR (2nd and 3rd years) respectively. Are the two scenarios effectively the same for Indian tax purposes. My naive understanding is that this does not have any impact on US taxes.
I tried searching an answer for this on this forum without much success. Apologies if this has already been discussed and much appreciated if someone can direct me to the thread/post.
Thanks in advance

Yes, there are significant difference.
01. NRI stands for " Not a RESIDENT of India" but an Indian origin individual - Such a person does not have any income tax obligation to the republic of Inda.
02. RNOR stands for "RESIDENT (physically present)" but "Not Ordinarily Resident" in India - Such a person has tax obligation to India on income sourced in India but foreign income is exempt.
03. For elaboration, search in: http://law.incometaxindia.gov.in/DIT/Income-tax-acts.aspx, Sec. 4 & 6

[gwldaddu]

Yes, there are significant difference.
01. NRI stands for " Not a RESIDENT of India" but an Indian origin individual - Such a person does not have any income tax obligation to the republic of Inda.

Are you sure?

Actually, above mentioned person has to pay taxes on an income sourced in India. Please double check your claim..

[dbs]

Yes, there are significant difference.
01. NRI stands for " Not a RESIDENT of India" but an Indian origin individual - Such a person does not have any income tax obligation to the republic of Inda.

I was under the impression that NRI stands for "Non-Resident Indian" effectively meaning what you have stated; but I believe does not include Indian Origin persons that have acquired a foreign nationality.

[hvn2hm]

[QUOTE]

Yes, there are significant difference.
01. NRI stands for " Not a RESIDENT of India" but an Indian origin individual - Such a person does not have any income tax obligation to the republic of Inda.
02. RNOR stands for "RESIDENT (physically present)" but "Not Ordinarily Resident" in India - Such a person has tax obligation to India on income sourced in India but foreign income is exempt.
03. For elaboration, search in: http://law.incometaxindia.gov.in/DIT/Income-tax-acts.aspx, Sec. 4 & 6

bmukherji,

Thanks for the explanation of "NRI" and "RNOR" terms.

Are you saying that in my case as stated in the OP, I have to pay taxes on my Indian income for the year 2010 if I have "RNOR" status but not if I have "NRI" status based on actual date of return?

Is there a difference in Indian taxes on "foreign investments, returns etc." between the two scenarios i.e. 3 years RNOR vs. 1 yr NRI + 2 yr RNOR?

[gwldaddu]

bmukherji,

Thanks for the explanation of "NRI" and "RNOR" terms.

Are you saying that in my case as stated in the OP, I have to pay taxes on my Indian income for the year 2010 if I have "RNOR" status but not if I have "NRI" status based on actual date of return?

Is there a difference in Indian taxes on "foreign investments, returns etc." between the two scenarios i.e. 3 years RNOR vs. 1 yr NRI + 2 yr RNOR?

If you are an RNOR, you pay taxes on income that is generated in India
If you are an NRI, you pay taxes on income that is generated in India.

I do not see any difference.

[RRK]

A simple query has become a confused matter now.

NRI = Non-resident Indian -has no obligation to pay taxes on foreign income to Govt of India.; But has to pay Indian taxes on indian source income.

RNOR = Resident but Not Ordinarily Resident - taxes are same as above. Only TDS rates and tax rates are different between NRI and Resident.

R = Resident of India - have to pay taxes on global income

Certain investments are not available to NRI - PPF, post office time deposits, company deposits, etc;
RNOR can invest in all schemes that are available for residents. And enjoy the same tax rules and exemptions that are available to residents.