Only days spent in India to decide NRI tax status: ITAT

Only days spent in India to decide NRI tax status: ITAT 

16.03.2025

Mumbai : Mumbai Income Tax Appellate Tribunal (ITAT) has ruled in favour of an individual who claimed his tax residential status to be that of a ‘non-resident’ as he had spent 210 days on work abroad, reports Lubna Kably. 

As India does not tax overseas income in the hands of a non-resident, M Gulati did not disclose his overseas income of Rs 1.2 crore for FY 2015-16. He contended he had spent less than 182 days in India and was a non-resident. But I-T claimed that of the 210 days, he’d spent 28 days looking for work, and hence a tax resident of India. ITAT made it clear an individual’s tax residential status must be determined solely by the number of days spent in India. 

The ITAT rejected the contention of I-T dept, which had recomputed Gulati’s stay outside India as it partly comprised of days spent jobhunting. ITAT order provides clarity on the tax treatment of individuals who split their time between employment and job search abroad. It reinforces that any period spent outside India for employment or in search of job should be counted towards non-resident status determination. The decision will benefit expatriates who go overseas in search of a job and gain employment. 

A person who is a tax resident of India has to pay tax on his global income. A nonresident does not pay tax in India on his/her overseas income but only on income that accrues or arises in India (eg: rent from property in India, bank interest, etc). Number of days stayed in India determines tax residency. 

Under provisions of I-T Act, viz: Explanation 1 to Section 6(1), if an individual leaves India for ‘purpose of employment’ overseas, he/ she will qualify as a tax resident only if stay ‘in India’ is for 182 days or more in a year. From FY 2020-21, the period was reduced to 120 days or more for individuals whose income (other than foreign sources) exceeds Rs 15 lakh. The I-T officer noted Gulati had spent 210 days outside India in the relevant AY (2016-17), of which 28 days were in search of job. 

He held that only days of actual employment could be considered. Thus, based on a revised calculation, he held that Gulati had spent more than 182 days in India and was hence a tax resident. Consequently, the overseas salary of Rs 86.2 lakh and interest income of Rs 2.8 lakh would be taxable in India. The Appellate Commissioner upheld the stand of the I-T officer by holding that during the 28-day period, the taxpayer had not received any salary and the adjustment in days was correctly made. However, ITAT relying on judicial precedents disagreed and overruled the I-T department’s stand. The tax tribunal held seeking employment abroad also qualifies as a legitimate purpose under Explanation 1 to section