Would moving outside India for business purposes impact my residential status?

Question: I am an individual taxpayer moving abroad for the first time after staying in India for 174 days in the current financial year for the purpose of employment. What would be my residential status for the said financial year? Would it have an impact on my residential status if I would be moving outside India for business purposes?

Answer by Dr. Suresh Surana, Founder, RSM India: In accordance with Section 6(1) of the Income Tax Act, 1961 (hereinafter referred to as ‘the IT Act), an individual would be considered as an Indian tax resident if:

* He is in India for a period of 182 days or more in the current financial year

* He has within 4 years preceding the relevant financial year been in India for a period of 365 days or more and is in India for a period of 60 days or more in the relevant financial year.

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However, Explanation–1(a) to section 6(1) of the IT Act further extends the period of 60 days and substitutes the same to 182 days in case of an Indian citizen who has left India for the purpose of employment outside India.

As the taxpayer has not been in India for a period of 182 days or more, the first condition would not be satisfied. Further, as the taxpayer is moving abroad for the purpose of employment, the second condition would also not be satisfied and the taxpayer would be considered as a Non-resident for tax purposes.

Further, the Kerala High Court in the case of CIT v/s O. Abdul Razak, [2011] 337 ITR 350 (Ker.) as well as the Mumbai Tribunal in the case of ACIT vs. M/s Shri Nishant Kanodia TS-11-ITAT-2024 (Mum) has held that no technical meaning is intended for the word “employment” used in the Explanation 1(a). As such, going abroad for the purpose of employment would only mean that the visit and stay abroad should not be for other purposes such as a tourist, or for medical treatment or for studies or the like.

Going abroad for the purpose of employment therefore would mean going abroad to take up employment or any a vocation, which takes in self-employment like business or profession. As such, based on the said case rationale, in case such taxpayer is moving abroad for the purpose of business, the aforementioned second condition would not be satisfied and as such, there would not be any impact on the residential status and such taxpayer would still be a non-resident for tax purposes.

Disclaimer: The views and facts shared above are those of the expert. They do not reflect the views of financialexpress.com.