NRI is permanently returning to India after retirement. Can he open SCSS account with RNOR status?

Prathap Nair will turn 60 next month. He is permanently returning to India after retirement. In an email dated April 3, Nair asked whether he could open a Senior Citizen Savings Scheme (SCSS) account with the RNOR status, which he will continue to hold for one more year.

"I understand NRIs are not allowed to open SCSS. I will return to India on 16th April 25 permanently due to superannuation. I will turn 60 on 1st May 2025. Though I return permanently to India, I will retain my status as RNOR (resident but not ordinarily resident) for one year for tax purposes. With this status of RNOR, am I eligible to open SCSS after turning 60?" Nair wrote in the mail.

The RNOR (Resident but Not Ordinarily Resident) status is a concept defined exclusively under the Income Tax Act, 1961, which is used for determining the taxability of global income in India.

However, it is important to note that the Foreign Exchange Management Act (FEMA)—which governs eligibility for opening and operating deposit accounts such as the Senior Citizens Savings Scheme (SCSS)—does not recognise the RNOR category. Under FEMA, a person is either classified as a Resident or a Non-Resident.

“Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Hindu Undivided Families (HUFs) are not eligible to invest in the accounts under the SCSS..."

It further says that if a depositor becomes a Non-Resident Indian after his/her opening the account and during the currency of the account under the SCSS rules, the account may be allowed to continue till maturity, on a non-repatriation basis, and the account will be marked as a Non-Resident account.

Based on this, eligibility to open an SCSS account is dependent on one's residency status under FEMA, not on their taxation status under the Income Tax Act. Therefore, even if an individual qualifies as an RNOR for tax purposes, they are required to be a Resident under FEMA at the time of opening the SCSS account.

Thus, while RNOR status exists only for income tax purposes, SCSS eligibility is determined based on FEMA residency. Hence, a returning senior citizen classified as RNOR under the Income Tax Act, but considered a Resident under FEMA, can open an SCSS account, provided they meet the age-related criteria. However, if the individual is still considered an NRI under FEMA, they are not eligible to open a new SCSS account.