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      In the case of Binny Bansal,1 the Bangalore Bench of the Income Tax Appellate Tribunal (the “Tribunal”) has held that an individual may continue to qualify as an Indian tax resident despite overseas relocation, foreign employment, and movement of family abroad, when factual and economic ties to India remain significant.

      The Tribunal denied the taxpayer benefit of a 182-day rule available to an Indian citizen, who being outside India, comes on a visit to India during the relevant year, for determining his residential status under the Income-tax Act, 1961 (the “Act”).2 Further, applying the tie-breaker criteria under India–Singapore tax treaty (‘the Treaty’),3 the Tribunal concluded that the taxpayer’s centre of vital interests and habitual abode remained in India.

      The Tribunal adopted a substance-over-form approach, emphasizing that residency determination must be based on a holistic evaluation of personal and economic ties rather than mere physical relocation or employment abroad. Accordingly, the Tribunal held that the taxpayer is a resident of India, liable for capital gains tax arising from the sale of shares in a foreign company.

      WHY THIS MATTERS

      This decision highlights the importance of evaluating tax residency based on substance rather than form. In certain scenarios, individuals relocating overseas for employment may still be treated as Indian tax residents if significant personal and economic ties to India remain.

      Key Highlights

      Facts of the Case

      • The taxpayer, an individual entrepreneur and co-founder of a foreign company (“F Ltd”), was a tax resident in India for several years until the financial year (FY) 2018-19.

      • He resigned from his executive role with F Ltd in FY 2018-19 and relocated to Singapore for the purpose of full-time employment with a Singapore entity.

      • His immediate family also moved to Singapore. Personal arrangements such as accommodation, schooling, and banking were established in Singapore.

      • He continued to hold significant investments in India, including equity interests in as well as ownership of immovable properties.

      • During FY 2019–20, the taxpayer changed his employment to another Singapore entity.

      • During the year at issue in the case, i.e., FY 2019-20, the taxpayer travelled to India on multiple occasions, resulting in an aggregate stay exceeding the 60 days threshold, though below the extended threshold of 182 days applicable in specified situations.

      • During the same FY, the taxpayer transferred a portion of his shares in F Ltd to different buyers. Tax was withheld at source on the transaction by one of the buyers in India.

      • In his India tax return, the taxpayer claimed non-resident (NR) status and took the view that capital gains arising from the sale of F Ltd shares were not taxable in India as per Article 13(5) of the Treaty.

      • The Income Tax Department (the “Revenue”), however, denied the Treaty benefit and concluded that the taxpayer continued to qualify as an Indian tax resident during FY 2019-20 and taxed his global income, including capital gains arising from the share sale, in India.

      • For the purpose of determining his residential status, the Revenue examined the nature of the taxpayer’s overseas employment, residential arrangements, duration and purpose of visits to India, and ownership and availability of Indian residential properties.

      Relevant Provisions

      Residency Rules under the Act

      • An individual is regarded as a “resident” in India for a FY if they:

        • Stay in India for 182 days or more during the relevant FY; or

        • Stay in India in the relevant FY for 60 days or more and for 365 days or more during the preceding four FYs.
           
      • However, this 60-day period is extended to 182 days in case of an individual (an Indian citizen) who leaves India for employment outside India.

      • The 182-day relief is also available in case of an individual (an Indian citizen or a person of Indian origin), who is outside India and visits India.

      Residency Rules under the Treaty

      As per Article 4(2) of the Treaty, the tie-breaker criteria for determining an individual’s residential status in case of dual residency are applied in the following order: permanent home, centre of vital interests (i.e., personal and economic relations), habitual abode, and nationality.

      Capital Gains under the Treaty

      The residual clause, i.e., Article 13(5), provides that capital gains arising from the alienation of property not specifically mentioned in the article shall be taxable only in the country of which the alienator is a resident.

      Taxpayer’s Contentions

      • The taxpayer contended that he was an NR during the relevant year as his stay in India was for only 141 days.

      • The taxpayer claimed the benefit of the 182 days under the Act applicable to a person “being outside India” visiting India.

      • The taxpayer was a resident of Singapore, and even if dual residency existed, he should qualify to be a resident of Singapore as per the tie breaker criteria under the Treaty.

      • Consequently, capital gains on the sale of F Ltd shares were claimed to not be taxable under the provisions of the Act, as well as under the Treaty.

      Revenue’s Contentions

      • The taxpayer by virtue of staying for 60 days in the relevant year and 365 days or more in India in the four preceding years, satisfied the provisions of the Act to qualify to be a resident of India.

      • The relaxed criteria of 182 days are only applicable to individuals who were already NR and the other condition was inapplicable as the taxpayer had left India during FY 2018-19 and not during FY 2019-20.

      • Under the Treaty tie-breaker criteria, the Revenue emphasized the taxpayer’s permanent residential properties, substantial economic interests, and habitual presence is in India and his nationality is Indian.

      • The Revenue also contended that the taxpayer’s relocation to Singapore was motivated by tax implications in India.

      Tribunal’s Decision

      • The Tribunal found that the statutory relaxation for visits is intended to benefit individuals who were already NRs and cannot be extended to those who were residents in prior years. The Tribunal held that the benefit of the 182 days is available only in the year of departure and not in subsequent years.

      • The Tribunal emphasized that residency under the Treaty must be determined based on a holistic evaluation of personal and economic ties throughout the FY and not only at the end of the year. It considered factors such as ownership and availability of property in India, significant investments, banking relationships, and habitual presence throughout the year. Based on this analysis, the Tribunal concluded that the centre of vital interests and habitual abode of the taxpayer were closer to India.

      • Because the taxpayer was treated as a resident both under the Act and the Treaty, the Tribunal concluded that gains from the sale of shares of the overseas company were taxable in India and relief under the Treaty was not available.

      KPMG INSIGHTS

      The decision provides guidance on the factors to be considered in determining individual tax residency in cases involving cross-border movement.

      It emphasizes that residency should be assessed based on the substance and continuity of personal and economic ties, while highlighting that timing and robust supporting documentation are critical to substantiate a claim of residential status.

      If assignees and/or their programme managers have any questions or concerns about the scope of the update, its application and potential impacts, and appropriate next steps, they should consult with their qualified tax professional or a member of the GMS tax team with KPMG in India (see the Contacts section).

      FOOTNOTES:

      1  Income Tax Appellate Tribunal, Binny Bansal v. DCIT, International Taxation (IT(IT)A No. 571/Bang/2023).

      2  Central Board of Direct Taxes, Income Tax Department, Determination of Residential Status under Income-tax Act, 1961, published in February 2022.

      3  India Income Tax Department, Article 4(2) and Article 13(5), published on 1 September 2011.

      RELATED RESOURCE

      This article is excerpted, with permission, from " Tribunal holds taxpayer resident of India despite relocation and overseas employment" in Tax Flash News (14 January 2026), a publication of the KPMG International member firm in India.

      Contacts

      Parizad Sirwalla
      Parizad Sirwalla

      Partner and National Head – Tax, Global Mobility Services

      KPMG in India

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