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Archive / Investment Adviser (Level 2) / Concepts in Taxation
nism-series-xb-rnor-status-foreign-income-tax-benefit[ INVESTMENT ADVISER (LEVEL 2) ]

When Mr. & Mrs. Gupta return to India after 20 continuous years of non-residence abroad, they qualify as 'Resident but Not Ordinarily Resident' (RNOR) for the first 2 financial years under Section 6(6). What is the primary tax benefit of RNOR status?

[ A ]They pay zero tax on Indian salary and business income
[ B ]They are exempt from Indian GST on consumer purchases
[ C ]They can import 10 kg of physical gold duty-free
[ D ]Their foreign income (such as US bond interest, US rental income, and US capital gains) is NOT taxable in India during the RNOR period, unless derived from a business controlled in or profession set up in India[ CORRECT ]
Takeaway

The primary benefit of RNOR status is that the Guptas' foreign-source income remains exempt from Indian tax during the RNOR period, unless linked to an Indian-controlled business or profession, so option D is correct.

Derivation
RNOR status, available for up to two financial years under Section 6(6) for long-term returning residents, effectively extends non-resident-style tax treatment to foreign income even though the individual is technically 'resident' for other purposes. Foreign income such as US bond interest, rental income, and capital gains stays outside the Indian tax net during this window, unless it derives from a business controlled in or a profession set up in India. This tests whether candidates understand RNOR as a genuine transition buffer specifically for foreign-source income — not a general tax holiday covering Indian income, GST, or customs duties, which the other options incorrectly claim.
Why the others fail
A — They pay zero tax on Indian salary and business income
Indian-source salary and business income remain fully taxable in India for RNOR individuals; RNOR status provides no exemption on domestic earnings.
B — They are exempt from Indian GST on consumer purchases
RNOR status provides no exemption from Goods and Services Tax on consumer purchases; GST applies uniformly regardless of income-tax residential status.
C — They can import 10 kg of physical gold duty-free
Customs duties on physical gold imports are governed separately by Customs regulations and are not waived or altered by RNOR income-tax status.