The question of tax residency has always occupied a sensitive space in Indian income-tax law, particularly for individuals who operate across borders. Jurisprudence in this area is rapidly evolving. In 2026, this issue once again assumed prominence following a detailed ruling by the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) in a case involving Flipkart co-founder Binny Bansal. While the case revolved around one individual’s tax assessment, its implications extend far beyond, touching Indian entrepreneurs, expatriates, start-up founders, and globally mobile professionals.

The tribunal’s decision reaffirmed a fundamental principle: residential status is determined by statutory presence and factual connections, not by intention or relocation alone. This ruling offers critical guidance on how Indian tax authorities interpret residence in an era of global work arrangements.

Context of the Dispute

Binny Bansal had relocated to Singapore after stepping down from his active managerial roles in India in November 2018. He left India to take up employment as Chief Executive Officer of X to 10 X Technologies Pte. Ltd., previously known as BTB Consulting Pte. Ltd., and commenced work in Singapore with effect from 22 February 2019. In fact, he stayed in India for more than 365 days during the four preceding years and for 141 days in the financial year 2019–20.

During the relevant financial year (FY 2019–20), he claimed to be a non-resident under Indian tax law and asserted that his income—particularly capital gains arising from the sale of shares, including Flipkart shares—should not be taxable in India. He contended that, out of the 141 days, he was stranded in India for 38 days owing to the COVID-19 pandemic. He also contended that he had a permanent home in Singapore and no permanent home in India, as he neither owned nor rented any residential property in India; the house under construction at Koramangala, Bengaluru, was incomplete and not available for occupation.

On the test of centre of vital interests, it was submitted that during FY 2019–20, Binny’s personal and economic relations were predominantly in Singapore, where his nuclear family resides, his children are educated, his spouse is employed, his banking relationships are maintained, and he is gainfully employed, with no office or economic base in India. Accordingly, his centre of vital interests lies in Singapore. Further, the assessee asserted that his habitual abode was also Singapore, being the place of his customary presence, supported by limited days of stay in India (91 days in FY 2020–21, 50 days in FY 2021–22, and 18 days in FY 2022–23)

The tax authorities challenged this position, arguing that despite his overseas relocation, his physical presence in India during the year and his historical connection to India brought him squarely within the definition of a “resident” under the Income-tax Act, 1961. The dispute ultimately reached the Bangalore ITAT, which examined both domestic law and treaty provisions in detail.

Legal Framework Governing Residential Status

Under Section 6 of the Income-tax Act, an individual’s residential status is primarily determined based on the number of days spent in India during a financial year, along with presence in preceding years.

A person is treated as a resident if:

a. He or she is present in India for 182 days or more in a financial year, or

b. He or she is present in India for 60 days or more during the year and 365 days or more during the four preceding years.

Explanation 1 to Section 6(1)(c) provides specific relaxations to the 60-day threshold in defined circumstances. Under Explanation 1(a), in the case of an Indian citizen leaving India in any previous year for employment outside India, or as a member of the crew of an Indian ship, the period of 60 days is to be substituted with 182 days. Similarly, under Explanation 1(b), in the case of an Indian citizen or a person of Indian origin who, being outside India, comes on a visit to India, the 60-day requirement is replaced with 182 days.

These relaxations are conditional in nature and operate only in the circumstances expressly contemplated by the statute. They are intended to mitigate hardship for individuals who are otherwise outside India and whose residential status could be adversely affected by short-term presence in India, and do not automatically apply to every individual working or residing abroad.

Tribunal’s Analysis on Physical Presence

In the year under consideration, Binny Bansal had stayed in India for more than 60 days and had a substantial stay history in the four prior years. On a plain reading of the statute, these facts satisfied the criteria for resident status.

Explanation 1(b) – Being outside India

The Tribunal identified the central controversy as whether the assessee, an Indian citizen, could invoke Explanation 1(b) to Section 6(1)(c) for AY 2020–21 on the footing that he was “being outside India”, thereby claiming non-resident status despite substantial physical presence in India.

Section 6(1)(c) prescribes residence where an individual is present in India for 182 days or more in the relevant previous year, or 60 days in that year and 365 days in the preceding four years. Explanation 1(b) relaxes the 60-day threshold to 182 days for Indian citizens “being outside India”.

The Tribunal held that Explanation 1(b) to Section 6(1)(c) is intended to operate only in cases where the assessee was already a non-resident in the preceding years, and not as a mechanism to convert a resident into a non-resident. This conclusion was reached through a purposive reading of the provision, treating the Explanation as a relaxation attached to the main residence test, rather than an independent route to non-resident status. The Tribunal emphasised that the phrase “being outside India” must be understood in context and cannot be equated with mere overseas employment or physical absence in the relevant year. Accepting such a literal interpretation would defeat the structure of Section 6 and allow perpetual avoidance of residence through managed travel.

In reaching this conclusion, the Tribunal placed significant reliance on the legislative history of Explanation 1(b). Reference was made to the Memorandum to the Finance Act, 1982, and subsequent amendments under the Finance Acts of 1989 and 1994, all of which consistently describe the relaxation as a measure to prevent loss of non-resident status for Indian citizens working abroad who visit India for short durations. The Tribunal noted that the repeated use of expressions such as “without losing non-resident status” in the Memoranda clearly indicates that Parliament intended the benefit to apply only to those who were already non-residents, and not to individuals who were residents in the immediately preceding years.

The Tribunal also relied on CBDT Circular No. 554 dated 13 February 1990, which expressly states that the purpose of extending the permissible stay was to enable non-resident Indians to remain in India for longer periods without forfeiting their non-resident status. Treating the Circular as a contemporaneous executive exposition, the Tribunal held that administrative guidance uniformly proceeds on the assumption that Explanation 1(b) is status-preserving, not status-conferring. On this combined reading of the statutory scheme, Finance Act Memoranda, and Board Circulars, the Tribunal concluded that Explanation 1(b) cannot be invoked by an assessee who was a resident in the preceding years to claim a relaxed day-count threshold.

Explanation 1(a) – Leaves India for employment

The Tribunal held that Explanation 1(a) was introduced to mitigate hardship in the year of transition when an Indian citizen leaves India for employment or residence abroad. It was clarified that such a provision does not operate as a rolling or perpetual concession. The Assessee’s argument that he had left India for employment again in the year under consideration was rejected.

Treaty Tie-Breaker Rules: Not an Automatic Shield

Having held the assessee to be a resident under domestic law, the Tribunal proceeded to examine treaty relief under Article 4(2) of the India–Singapore DTAA.

The Tribunal applied the sequential tie-breaker tests:

1. Permanent Home: While the assessee maintained accommodation in Singapore, the Tribunal noted that permanent availability must be assessed in substance, not form.

2. Centre of Vital Interests: The Tribunal placed decisive emphasis on economic allegiance, entrepreneurial control, asset concentration, and source of income.

3. Habitual Abode: Physical presence patterns, when viewed holistically, did not displace the dominance of India as the focal point of the assessee’s life and business.

4. Nationality: Relevant but not determinative in the present factual matrix.

The Tribunal held that the assessee’s centre of vital interests remained in India, given the locus of strategic business decision-making, investment control, and enduring economic ties. A notable feature of the Tribunal’s reasoning is its emphasis on economic substance over migratory intent. The Tribunal held that mere assertions of relocation, unsupported by a durable transfer of economic base, cannot override substantive Indian nexus.

Tax Consequences of the Decision

As a direct consequence of the Tribunal’s findings on residential status, the capital gains arising during the relevant previous year were held to be taxable in India under the domestic provisions of the Act. The Tribunal affirmed the jurisdiction of the tax authorities to assess such income, having concluded that the assessee qualified as a resident for the year under consideration.

Broader Implications for Indians Working Abroad

The ruling carries significant implications for individuals who relocate overseas while continuing to maintain substantial economic or professional connections with India, undertake frequent visits to India, or proceed on the assumption that foreign employment, by itself, ensures non-resident status.

For such globally mobile taxpayers, the decision highlights the risks associated with breaching the 60-day presence threshold, particularly where the individual was a resident in the preceding years. In these circumstances, even relatively short or intermittent stays in India may trigger resident status, thereby exposing global income to taxation in India under domestic law. The judgment therefore reinforces the need for careful monitoring of physical presence and residential history, rather than reliance solely on overseas employment or relocation.

Conclusion: Residency Is a Question of Reality, Not Intention

The Bangalore Tribunal’s ruling in the Binny Bansal case reiterates a timeless principle of tax law: residency follows facts, not aspirations. In a world of borderless work and international mobility, Indian tax law continues to anchor residency to physical presence and enduring connections.

As of 2026, this decision stands as a cautionary benchmark for entrepreneurs, start-up founders, and professionals navigating cross-border lives. It reminds taxpayers that residential status is not something to be assumed or declared casually—it must be earned through consistent and demonstrable change.

For Indian tax jurisprudence, the ruling strengthens clarity. For taxpayers, it reinforces discipline. And for advisors, it serves as a reminder that in residency matters, details decide destiny.

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