Binny Bansal ITAT Ruling: Exit Date Now Determines Lifetime NRI Residency

By CA Surekha S Ahuja

Sec.6(1)(c) Interpretation, Strategic Implications for NRIs, Founders, and ESOP Holders

Introduction

The ITAT Bengaluru ruling in Binny Bansal vs DCIT (IT(IT)A No.571/Bang/2023, decided 9 January 2026) has fundamentally reshaped NRI tax planning in India.

Key outcome: The date of departure for employment abroad now dictates permanent residency status for all subsequent years, irrespective of the number of days spent abroad in future.

This is a decided case, not hypothetical, and is critical for:

• Salaried employees working overseas

• Founders and start-up executives

• ESOP beneficiaries

Statutory Framework

Section 6(1) – Resident Determination

A person is a resident if any of the following conditions apply:

1. 6(1)(a): Stayed in India ≥182 days in the FY; or

2. 6(1)(c): Stayed ≥60 days in the FY and ≥365 days cumulatively in the preceding 4 years.

Explanation 1(b) – Employment Abroad Relief

For an Indian citizen “being outside India, coming on a visit”, Section 6(1)(c)’s 60-day threshold is replaced by 182 days, allowing longer visits without triggering residency.

Conventional understanding: NRIs could visit India up to 181 days/year without losing NRI status.

Facts of the Case

• Exit year (FY 2019-20 in Bansal’s case): Binny Bansal spent >182 days in India before moving to Singapore → Resident under 6(1)(a).

• Subsequent years: Returned for 60–181 days → Did not qualify for Explanation 1(b) substitution.

• DTAA Relief (India–Singapore): Denied, as domestic law governs residency first.

ITAT Holding: Explanation 1(b) applies only to those who were non-resident at the start of the year.

Result: Post-October 1 departures face a permanent 60-day residency trap, applicable indefinitely.

Key Legal Interpretation

1. Exit-Year Residency is Decisive

   • Leaving on or after 2 October with ≥182 days in India → Resident for that FY.

   • Pre-October exits can qualify as non-resident immediately.

2. Explanation 1(b) Cannot Apply Post-October

   • Post-October exits lose the 182-day substitution permanently.

3. Section 6(1)(c) Governs Future Visits

   • Any visit ≥60 days in a year triggers resident status.

   • 365-day rolling rule ensures repeated taxation across years.

4. DTAA Relief is Secondary

   • Domestic law determines residency first; DTAA tie-breakers cannot override.

5. RNOR Status Offers Limited Relief

   • Post-exit RNOR (2–3 years) may reduce Indian taxation on foreign salary, but does not revive Explanation 1(b) for future visits.

Illustrative Examples – Salaried Employees vs Founders/ESOP Holders

Profile	Exit Date	Days in India (Exit FY)	FY Exit Status	Subsequent Visit (days)	Status	Tax Impact
Salaried Employee	25 Sept 2025	180	Non-Resident	90	Non-Resident	Foreign salary exempt; India salary taxed normally
Salaried Employee	7 Oct 2025	200	Resident	90	Resident	Foreign salary fully taxable; India salary taxed; cap visits <60 days/year
Founder / ESOP	25 Sept 2025	180	Non-Resident	120	Non-Resident	ESOP exercises exempt; foreign income exempt
Founder / ESOP	7 Oct 2025	200	Resident	120	Resident	ESOP vesting & foreign salary fully taxable; must cap India stays <60 days/year

Observation: Even a single post-October 1 exit can permanently subject global income, ESOP gains, and salary to Indian taxation.

Practical Advisory – Managing Exit & Visits

1. Exit Timing is Critical

   • Leave before 2 October → secure Non-Resident status; future visits up to 181 days allowed.

   • Leave on/after 2 October → permanent 60-day visit cap; future global income exposed.

2. Track Cumulative Days

   • Post-October exits must maintain ≤59 days/year in India.

   • Monitor 4-year rolling total to avoid Section 6(1)(c) trigger.

3. Salary and ESOP Planning

   • Post-October exits: ESOP exercises & vesting, foreign salary, and other global income are fully taxable.

   • Pre-October exits: ESOPs & foreign salary generally remain exempt.

4. DTAA & RNOR Strategy

   • DTAA cannot override domestic residency rules.

   • RNOR status can reduce taxation but does not restore 182-day substitution.

5. High Court Appeal Considerations

   • Restrictive interpretation of “being outside India” could be challenged.

   • Permanent forfeiture of Explanation 1(b) may be argued as overreach.

Assessment Year Exposure

Exit Type	Exit FY Status	Subsequent FY Risk	Future Years
Pre-October Exit	Non-Resident	Low	Visits up to 181 days/year; NRI benefits continue
Post-October Exit	Resident	High	Any visit ≥60 days triggers Resident; global income taxed indefinitely

Bottom line: FY of departure sets the stage for all future assessment years, making timing more important than total days.

Conclusion – Exit Date Rules the Game

The Binny Bansal ruling is a structural shift in NRI tax planning:

• Pre-October exits: Safe NRI path; 182-day visit flexibility; ESOP/salary benefits preserved.

• Post-October exits: Lifetime 60-day cap; global income fully taxable; ESOPs & foreign salary exposed.

Actionable:

• Plan exit date carefully.

• Monitor future visits & rolling presence.

• Structure salary, ESOP, and foreign income to mitigate permanent Indian tax liability.

Ignoring this ruling could permanently subject your worldwide income to Indian taxation—even with minimal visits.