Understand India’s tax residential status rules – 182 days vs 120 days, NRI taxation, and the landmark M. Gulati case. Learn how job-hunting days abroad impact your NRI status.
👤 Q1: What actually determines your tax residential status in India?
✅ Answer:
Your number of days in India during a financial year (April to March). The basic rule:
- If you’re in India for 182 days or more, you’re a resident.
- If you’re leaving India for employment, then less than 182 days means you’re a non-resident (NRI).
🧠 Key Insight: From FY 2020-21, for those earning more than ₹15 lakh (excluding foreign income), the 182-day limit is reduced to 120 days.
📌 Example: Ravi leaves India for Dubai on July 15 to search for a job. He stays outside for the rest of the year. Since he was in India for less than 182 days, he’s a non-resident, even though he was job-hunting and not yet employed.
🌎 Q2: How does being a resident vs non-resident affect your taxes?
✅ Answer:
- Resident → You’re taxed on global income.
- Non-resident → Only your Indian income (like rent or bank interest in India) is taxed.
📌 Example: Anita earns ₹25 lakh in the US and ₹2 lakh from Indian FD interest.
- If she’s a resident: Both are taxed.
- If she’s a non-resident: Only the ₹2 lakh FD interest is taxed in India.
⚖️ Q3: What was the core dispute in the M. Gulati case?
✅ Answer:
The IT Department excluded 28 days Mr. Gulati spent job-hunting abroad, claiming only days of actual employment count towards NRI status.
They said, “He wasn’t working yet, so he’s still an Indian resident and owes tax on ₹86.2 lakh salary earned abroad.”
📜 Q4: What did the Mumbai ITAT rule in Mr. Gulati’s favor?
✅ Answer:
The ITAT said NO — residential status is based on days spent in India, not the purpose or status of employment abroad.
📣 Key Ruling: Even job-hunting days abroad count as valid days outside India for determining NRI status.
📌 Example: You leave India in August to find a job in Canada. You get hired in November. 👉 ITAT says: Your NRI clock starts from August, not November.
🚀 Q5: Why does this ruling matter to Indian expatriates?
✅ Answer:
It saves many job-seekers from unexpected global tax. Now, your days abroad—whether job-hunting or working—are valid for NRI status.
📌 Case in Point: Gulati avoided tax on ₹86.2 lakh overseas salary because those 28 days of searching for work secured his NRI status.
📘 Q6: Which provision of law was central to this decision?
✅ Answer:
Explanation 1 to Section 6(1) of the Income-tax Act:
It says that if a person leaves India “for employment”, the 182-day rule applies, and they can become an NRI.
🧠 Insight: ITAT interpreted “for employment” to include “in search of employment.” So you’re covered even before signing the job offer!
💰 Q7: What income was the tax department trying to tax?
✅ Answer:
They aimed to tax:
- ₹86.2 lakh (overseas salary),
- ₹2.8 lakh (interest income).
They argued Gulati was a resident, but lost the case due to the day-count rule.
🧾 Q8: Does this ruling also apply to those crossing 120 days (not just 182)?
✅ Answer:
Yes! If your Indian income (excluding foreign) is more than ₹15 lakh, the 120-day rule applies. Gulati’s case clarifies that any day outside India counts, whether job-hunting or working.
🧩 Final Takeaway
🕒 Your NRI status depends on days in India, not your employment status abroad.
✈️ Left India to find a job? You’re still counted as outside India — and that can protect you from paying tax on foreign salary.
✅ FAQs on Residential Status in India
Q. Where can I read official FAQs on residential status and NRI taxation?
👉 Income Tax Department – FAQs on Taxation
Q. Does residential status change every year?
Yes. It is determined annually based on your stay in India.
Q. If I become an NRI, do I still need to file ITR in India?
Yes, if you have taxable income in India above the basic exemption limit.
Q. Can NRIs take advantage of DTAA (Double Taxation Avoidance Agreement)?
Yes, NRIs can claim relief under DTAA to avoid paying tax twice on the same income.
👨💼 Prepared by: CA Bhavesh Panpaliya
📞 For Tax Planning & NRI Compliance Assistance
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