Late one evening, a successful Indian entrepreneur sat across his dining table in Singapore, while news alerts from India flashed on his phone. A few months earlier, he had stepped away from the company he built, taken up a new role overseas, and re-rooted his family in a new country. Life had clearly moved on for him. Yet, back home, the tax authorities were asking a very old question: Where do you really belong for tax purposes?
That question lies at the heart of a recent and closely watched ruling of the Income Tax Appellate Tribunal (ITAT), Bangalore, in the case of Binny Bansal, co-founder of Flipkart [Sh. Binny Bansal Vs. DCIT – ITAT Bangalore- 2026]. While the names and numbers involved are large, the principles examined by the Tribunal are highly relevant for Indian professionals who move abroad for employment and continue to have ties with India, believing that “days of stay” alone decide their tax fate.
Why this case caught the tax world’s attention
The dispute revolved around Mr. Bansal’s residential status for FY 2019–20. He had resigned from his executive role in India, taken up full-time employment in Singapore, relocated his family there, and claimed non-resident status in his Indian tax return. During the same year, he also sold shares of a Singapore company and claimed that the resulting capital gains were not taxable in India due to application of India’s ta treaty with Singapore.
The tax department disagreed. Relying largely on the number of days spent in India and his historical presence here, the Assessing Officer treated him as a resident and taxed his global income. This difference in approach led to a detailed examination of what “residence” really means under Indian tax law.
Day counts matter, but they are not the whole story
Under the Income-tax Act, residency is often tested using day-count thresholds laid down in Section 6. In this case, the focus was on section 6(1)(c), which treats an individual as a resident if:
- they are in India for 60 days or more during the year, and
- 365 days or more in the preceding four years.
Mr. Bansal had spent around 141 days in India during the year and more than 365 days in India over the preceding four years. On the face of it, this brought section 6(1)(c) into play.
However, the law itself recognises that rigid counting can lead to hardship. Indian citizens who leave India for employment abroad, or who are genuinely based outside India and only visit India, are given a more relaxed threshold. In such cases, the shorter 60-day test can extend to 182 days under Explanation 1 to Section 6.
The real issue before the Tribunal was whether this relief applies only to those who were non-residents in earlier years, or whether it can also apply when a person has shifted employment and life abroad.
At its core, the case involved reading Section 6 of the Income-tax Act carefully, and in the right sequence. Finally, the Tribunal held that this relaxation is not automatic and must be read strictly in the context of the year of departure, residential status of assessee in earlier years and surrounding facts. In other words, the statute itself decides residency first.
“Being outside India” versus “having been non-resident”
A key interpretational debate centred on the phrase “being outside India” used in Explanation 1(b). The tax authorities argued that this benefit is meant only for individuals who were already non-residents in the past. The taxpayer contended that the law does not impose such a condition and that once a citizen genuinely moves abroad for employment, short visits to India should not automatically convert him back into a resident.
The Tribunal examined legislative intent of the relaxation, earlier judicial decisions, and the factual pattern of the case. It looked beyond labels and focused on whether the overseas move was real and backed by employment, immigration status, and continuity. Accordingly, it concluded that the word “being outside India” used in Explanation 1(b) is applicable to non-residents enabling them to spend longer durations in India without losing their non-resident status.
Even though this restrictive interpretation of “being outside India” versus “having been non-resident” may still be tested in future litigation, it sends a clear signal against individuals who carry out substantial economic activities from India but manage their period of stay to remain non-resident in perpetuity through day-count management.
From the Revenue’s perspective, the judicial interpretation and legislative context suggest that the expression “being outside India” requires a degree of permanence, stability, and substantive presence abroad. The benefit of Explanation 1(b) was not intended for persons who were residents in the immediately preceding year and who seek to acquire a colourable status of being “outside India” by shifting their base shortly before the commencement of the relevant previous year.
Mr. Bansal also contended that if explanation 1(b) to Section 6 fails, the relaxation available to Indian citizens who leave India for “employment” under Explanation 1(a), whereby the standard 60-day stay limit for Indian residency gets extended to 182 days, should be applied. The tax authorities successfully argued that this relaxation applies only in the specific year an individual first leaves India for employment, not in subsequent years when they visit.
Why DTAA could not override Indian law at the first stage
An important clarification emerging from the ruling is that DTAA does not determine residency on its own.
Treaties help resolve conflicts after domestic law is applied. They do not replace Section 6. The Tribunal reiterated that: residency must first be determined under Indian law, and only if a person is considered resident in both countries does the treaty’s tie-breaker mechanism become relevant.
This sequencing matters greatly. In this case, once the Tribunal concluded residency under Section 6, the treaty arguments lost their decisive force.
An easy way to understand the residency puzzle
Consider this simplified example:
Scenario A
X leaves India for overseas employment on 25 September 2025. His stay in India during FY 2025–26 is less than 182 days. By virtue of Explanation 1(a) to section 6, he is treated as non-resident for that year. Now, when X visits India in later years, the “60-day” condition does not automatically pull him back into residency, provided other conditions are not met.
Scenario B
X leaves India on 7 October 2025. He is in India for more than 182 days in FY 2025–26. He is therefore resident in the year of departure itself. In subsequent years, if X visits India for 60 days or more and satisfies the 365-day look-back rule, Section 6(1)(c) can apply again, even if his visits are short.
The key takeaway: the year of exit, and how residency is determined in that year, has a cascading effect on future years, and the benefit of Explanation 1(a) and 1(b) to Section 6(1)(c) is not automatic.
Where home, family, and personal ties fit in
The Tribunal did examine factors such as overseas employment, family relocation, accommodation, and economic ties. But these were supporting facts, not substitutes for statutory tests.
They helped confirm whether the taxpayer’s claims aligned with reality, but they did not override Section 6. This distinction is crucial and often misunderstood.
Why Income Tax Act, 2025 does not alter this position
It is also worth noting that this interpretation remains unchanged even after the Income Tax Act, 2025 comes into force from 1 April 2026. The new law does not rewrite the principles governing residential status. Instead, it reorganises and consolidates the existing provisions, merging the main section and its explanations into new section and sub-section numbers.
The substance of the residency tests, including the day-count rules and the treatment of Indian citizens leaving India for employment abroad, continues in the same form. In effect, what matters under the current law will continue to matter under the new Act as well; only the numbering changes, not the interpretation.
What this ruling quietly teaches taxpayers and advisors
Strip away the celebrity’s name and large figures, and this judgment offers practical guidance:
- Residency must be tested strictly under Section 6 first and past residence history matters.
- Tax treaties are not loopholes; they are negotiated rules when two countries assert taxing rights, meant to avoid double taxation and confusion.
- Exit date is not a technicality, it can shape tax status for years.
- Short visits to India can still have consequences if thresholds are crossed and other facts of case do not support the residency claim.
For professionals working overseas, startup founders who relocate, or senior executives juggling global roles, this ruling reinforces a reassuring idea: if your life has genuinely moved and the facts genuinely support the move, the law is prepared to recognise that shift.