What the Binny Bansal Tax Residency Ruling Means for HNIs Moving Abroad

The Bengaluru Bench of the Income Tax Appellate Tribunal (ITAT)’s January 2026 ruling in the Binny Bansal case underscores India’s substance-based approach to tax residency in cross-border mobility cases.

This article analyzes the ruling’s implications for treaty claims, capital gains taxation, and the increasing judicial scrutiny of residency planning for high-net-worth individuals (HNI) driven primarily by day-count optimization.

The Bengaluru Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that Binny Bansal, co-founder of e-commerce major Flipkart, remained an Indian tax resident for Assessment Year (AY) 2020–21 despite his relocation to Singapore.

In Binny Bansal v. Deputy Commissioner of Income Tax (IT(IT)A No. 571/Bang/2023), the tribunal announced on January 9, 2026, that Bansal was not entitled to tax treaty relief under the India-Singapore Double Taxation Avoidance Agreement (DTAA). Consequently, the ITAT upheld the taxation of his global income in India, including capital gains arising from the sale of shares in a foreign company.

Background on the tax residency dispute

The taxpayer, Binny Bansal, had been an Indian tax resident for several years up to FY 2018-19. During that year, he resigned from his executive position at Flipkart and relocated to Singapore to take up full-time employment with a Singapore-based entity. His immediate family also moved overseas, and arrangements relating to housing, schooling, and banking were established in Singapore.

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Despite this relocation, the taxpayer continued to hold substantial economic interests in India, including notable equity investments and ownership of immovable properties. In FY 2019-20, he changed employment to another Singapore entity and travelled to India multiple times, resulting in an aggregate stay of 141 days during the year.

During the same financial year, Bansal sold a portion of his shareholding in Flipkart to various buyers. One of the buyers withheld tax in India on the transaction. In his Indian tax return, Bansal claimed non-resident status and asserted that the resulting capital gains were not taxable in India under Article 13(5) of the India-Singapore DTAA.

The Indian Income Tax (IT) Department rejected this position, treated him as a resident for FY 2019-20, and brought his global income, including the capital gains, to tax in India.

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Day-count analysis under the Income-tax Act, 1961

The ITAT’s determination on residency was driven primarily by statutory thresholds under Section 6(1) of the Income-tax Act, 1961:

1. Stay in India during FY 2019–20: 141 days
2. Stay in India during the preceding four financial years: over 1,200 days

This exceeded the alternative residency test of Section 6(1) of the income tax law:

• 60 days in the relevant financial year, and
• 365 days or more in the preceding four financial years.

The Tribunal held that satisfying this test was sufficient, by itself, to establish Indian tax residency for the year in question.

Why the 182-day relaxation did not apply

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Bansal argued that the 60-day threshold should be extended to 182 days under Explanation 1(b) to Section 6(1), on the basis that he had gone abroad for employment.

The ITAT rejected this argument, clarifying that:

• The 182-day relaxation applies only in the year of departure from India.
• Bansal had left India in FY 2018-19, not in FY 2019-20.
• Managing days of stay in subsequent years does not revive or reset the benefit.

The Tribunal further observed that relaxation is intended to protect individuals who are already non-residents and should not be extended to individuals who were residents in earlier years.

Treaty provisions under the India-Singapore DTAA

Tie-breaker rules under Article 4(2)

Under Article 4(2) of the India-Singapore DTAA, dual residency is resolved by applying tie-breaker tests in the following sequence:

1. Permanent home
2. Centre of vital interests (personal and economic relations)
3. Habitual abode
4. Nationality

Capital gains allocation under Article 13

Article 13(5) of the India-Singapore DTAA provides that capital gains from the alienation of property not otherwise specified are taxable only in the country of residence of the alienator.

Article 13(5): The residual rule 

Capital gains from the sale of assets not covered by the specific categories above are taxable only in the country of residence of the seller. Article 13(5) typically applies to:

• Shares of foreign companies (in certain cases)
• Financial instruments not linked to a permanent establishment (PE)
• Other movable assets not specifically addressed elsewhere

However, Article 13(5) does not operate independently. It applies only if:

• The asset is not covered by earlier paragraphs, and
• The seller is a genuine nonresident under both domestic law and treaty tie-breaker rules.

Residency is therefore decisive.

Competing positions before the tribunal

Binny Bansal tax residency argument

• His physical presence in India was limited to 141 days during FY 2019-20.
• He was entitled to the extended 182-day threshold applicable to individuals “being outside India” and visiting India.
• He was a tax resident of Singapore, and even if dual residency existed, the DTAA tie-breaker rules favored Singapore.
• Consequently, capital gains from the sale of F Ltd shares were not taxable in India under domestic law or the DTAA.

IT department’s arguments

• The taxpayer met the 60-day plus 365-day test under the Act and therefore qualified as a resident.
• The 182-day relaxation was unavailable because he had not left India for employment during FY 2019-20.
• Under the DTAA tie-breaker analysis, the taxpayer’s permanent homes, substantial economic interests, habitual presence, and Indian nationality pointed decisively towards India.
• The relocation to Singapore was asserted to be tax-motivated.

Tribunal’s findings: Residency under domestic law

The ITAT reaffirmed that the statutory conditions under Section 6 of the Income-tax Act, 1961, were met and that the taxpayer was a resident for FY 2019-20. The benefit of extended day-count thresholds was held to be unavailable beyond the year of departure.

Treaty tie-breaker analysis

Importantly, the ITAT stressed that treaty residency must be evaluated over the entire financial year, rather than by reference only to circumstances existing after migration. On a holistic assessment, the tribunal noted:

• Continued ownership and availability of residential properties in India
• Notable investments and economic interests remaining India-centric
• Absence of immovable property in Singapore
• Habitual presence across both jurisdictions
• Indian nationality as a decisive factor where other tests were inconclusive

Based on these factors, the ITAT concluded that the taxpayer’s center of vital interests and habitual abode were more closely aligned with India.

Tax consequences

Since the taxpayer was treated as a resident under both the Act and the DTAA, the Tribunal held that:

• Capital gains from the sale of shares in the overseas company were taxable in India.
• Relief under Article 13(5) of the DTAA was not available.

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Key takeaways for founders and HNIs

This ruling reinforces several important principles:

• Physical relocation alone does not establish tax non-residency.
• Overseas employment and family movement are not determinative by themselves.
• Economic substance, continuity of ties, and timing of departure are critical.
• Treaty protection cannot override domestic residency where facts point to India as the center of vital interests.

The decision also signals judicial skepticism toward residence planning driven primarily by day-count management.

Conclusion

The Binny Bansal tax residency ruling clearly reaffirms India’s substance-over-form approach to tax residency in an era of heightened global mobility. The analysis shows that Indian tax authorities do not determine residency by relocation narratives or calibrated day counts in isolation. Instead, they assess personal, economic, and habitual ties holistically across the entire financial year.

For founders, promoters, and high-net-worth individuals (HNIs), the decision serves as a cautionary precedent: taxpayers can access treaty protection only by establishing genuine non-residency under both domestic law and treaty tie-breaker rules.

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