By R. Suryamurthy
A recent ruling by the Bengaluru bench of the Income Tax Appellate Tribunal (ITAT) in the case of Flipkart co-founder Binny Bansal could sharply restrict the ability of Indians working overseas to visit India without triggering resident tax status, according to tax expert Ved Jain.
In a detailed order dated January 9, the tribunal rejected Bansal’s claim that he qualified as a non-resident for tax purposes and denied him relief under the India–Singapore Double Taxation Avoidance Agreement (DTAA).
The ruling upheld the tax department’s application of Section 6(1)(c) of the Income Tax Act, which determines residential status based on the number of days spent in India.
The tribunal held that the benefit of the extended 182-day stay threshold — available to Indian citizens and persons of Indian origin visiting India — applies only if the individual was a non-resident in preceding years. If the individual was a resident in the year of departure, the standard 60-day test would continue to apply in subsequent years.
“This effectively creates two classes of Indian citizens leaving India for employment abroad, depending purely on the date of departure,” Jain said.
Under the ruling, an Indian citizen who leaves India for employment abroad on or after October 2 of a financial year will remain a resident for that year due to having spent more than 182 days in India.
In subsequent years, such a person would be treated as a resident if he spends 60 days or more in India and has stayed in India for at least 365 days over the preceding four years — a condition likely to be met for several years after departure.
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“This means such individuals cannot come to India for more than 59 days in any subsequent year without risking resident status and taxation on global income,” Jain said.
By contrast, an individual leaving India before October 2 would qualify as a non-resident in the year of departure if the stay is under 182 days. In later years, the extended 182-day threshold would continue to apply, allowing longer visits without loss of non-resident status.
Binny Bansal ruling
Bansal had argued that he was residing in Singapore for employment during the 2019–20 financial year and should be treated as a person “being outside India” who came to India on a visit. On that basis, he sought application of the extended stay threshold and exemption from capital gains tax on the sale of Flipkart shares under the India–Singapore tax treaty.
The tax department contended that the relaxation was available only to individuals who were already non-residents in the preceding year. Accepting Bansal’s argument, it said, would allow residents to repeatedly claim extended exemptions.
The tribunal agreed, holding that Bansal had stayed in India for more than 60 days and satisfied the conditions to be treated as a resident under Section 6(1)(c). It dismissed his appeal while directing the assessing officer to verify and reissue a pending refund of over ₹5.8 crore, if not already credited.
Interpretation concerns
Jain said the ruling departs from a literal reading of the statute by equating the phrase “who being outside India” with “who being non-resident,” relying on a previous Delhi bench ruling in the case of Sudhir Choudhrie.
“The reference in that case was not for determining residential status itself,” Jain said, adding that the tribunal’s interpretation could be open to challenge given settled principles of literal interpretation in fiscal laws.
Bansal retains the right to appeal the order in a higher court. Tax professionals expect the ruling to have wide implications for Indian professionals working overseas, particularly those who relocate after early October in a financial year.
This report is from 5WH. NewsGram holds no responsibility for its content.
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