Visa types, travel days and the tax rule you might miss

A recent Income Tax Appellate Tribunal (ITAT) ruling declared Mahadevan a tax resident of India for financial years 2012-13, 2013-14, and 2018-19, thereby making his global income taxable in India—despite his claim of being a non-resident.

Mahadevan, who operates restaurants and bakeries both in India and abroad, declared himself a non-resident in his income tax filings for the aforementioned years. He based this status on his interpretation of passport stamps, asserting that he had stayed less than 182 days in India in each relevant year. As a non-resident, he only paid tax on Indian-sourced income, leaving his overseas earnings out of the tax net.

Also read: NRI taxation: How to claim special tax concessions

However, a detailed review by the tax department—using passport records, visa copies, and data from the Foreigner Regional Registration Office (FRRO)—suggested otherwise. The officer concluded that Mahadevan exceeded the 182-day threshold in FY13 and FY14, and also met the 60-day-plus-365-days condition for FY19, thereby qualifying him as a tax resident under India’s Income-tax Act, 1961 (ITA).

Importantly, Mahadevan’s travel was under ‘social’ or ‘visitor’ visa categories, not business or employment—further undermining his claim of leaving India for professional reasons.

Mahadevan challenged the tax officer’s ruling at the first appellate level, where he found relief. The appellate authority ruled in his favour, interpreting his overseas trips as business-related despite the visa types. It accepted his stay in India to be under the threshold and upheld his non-resident status, exempting his foreign income from taxation.

On further appeal, the ITAT clubbed the cases and overturned the appellate ruling. It agreed with the tax department, affirming that Mahadevan was a resident for those years and his foreign income was liable to Indian tax.

Still, the Tribunal offered some relief: if Mahadevan could furnish proof of foreign taxes paid, foreign tax credit would be allowed.

Why the tribunal ruled against Mahadevan

FRRO data as credible proof: The Tribunal trusted FRRO records as reliable government data for determining days of stay.

Visa purpose matters: Frequent travel abroad did not equate to business if the visa stated otherwise. Since Mahadevan’s visas were for social visits, he could not claim the 182-day exception allowed for business departures.

UAE Tax Residency Certificate (TRC): Mahadevan produced a UAE TRC issued in 2021 for earlier years. The Tribunal held that under the India-UAE tax treaty, treaty benefits cannot apply if a person qualifies as a tax resident of India under domestic law.

Also read: Decoding dual taxation: What NRIs need to know for better tax efficiency

Key lessons for global Indians

Residential status is pivotal in determining tax liability and must be backed by appropriate records.

Count days with care

An individual’s residential status determines their tax liability in India and is primarily based on days spent in the country. While passport stamps are usually relied on, it’s advisable to cross-check stay records with FRRO data to avoid mismatches that may affect tax residency. Involuntary stays (e.g., passport seizures) are excluded.

For land entries from Nepal or Bhutan, where passports/visas aren’t required, documents like hotel receipts can help establish duration of stay.

Who is a resident?

A person is considered a resident in India if they:

• Stay over 182 days in the financial year, or
• Stay over 60 days in the year and over 365 days in the past four years.

The 60-day threshold is relaxed to 120 or 182 days for:

• Citizens or Persons of Indian Origin (PIOs) visiting India
• Those leaving India for employment or shipping jobs

Visa type matters

Residency status can also depend on the visa category used for travel. A person leaving India for work should not use tourist or social visas, as these may not support claims of business-related travel abroad under tax laws.

Dual residency & tie-breaker

If you’re classified as a resident in both India and another country, tax treaties apply a tie-breaker test. This considers:

• Where you live habitually
• Where you maintain a home
• Where your economic ties are stronger

This helps decide which country can tax your global income.

Also read: Golden tax window for NRIs: What RNOR means and how to use it

Ashish Karundia, founder, Ashish Karundia & Co., Chartered Accountants