Counting the Days: Why Extended Stays in India Could Trigger Tax Liabilities for Returnees from West Asia

The return of Indians from West Asia amid ongoing geopolitical tensions may lead to tax implications if their stay in India extends beyond certain thresholds. This situation could affect both individuals and businesses, altering tax obligations based on residency status. 

Understanding Tax Residency Rules 

Under the Income-tax Act, an individual's residential status is determined by the number of days spent in India during a financial year. Typically, a person becomes a resident if they stay in India for 182 days or more.  

Alternatively, staying 60 days or more in the relevant financial year and 365 days or more in the preceding 4 financial years can also qualify an individual as a resident.  

However, for Indian citizens or persons of Indian origin visiting India, the 60-day threshold is replaced by 182 days, or 120 days if their Indian income exceeds ₹15 lakh. 

Implications of Changing Residency Status 

Becoming a resident does not automatically mean that an individual's global income will be taxed. Residents are further classified as Resident and Ordinarily Resident (ROR) and Resident but Not Ordinarily Resident (RNOR).  

ROR individuals must pay tax in India on their global income and disclose foreign assets in their tax returns.  

In contrast, RNOR individuals are generally taxed only on income earned or received in India, as well as foreign income derived from a business controlled from India or a profession set up in India. 

Read More: Income Tax Department Warns of Fake Email Claiming Tax Demand for AY 2025–26! 

Potential Impact on Foreign Companies 

Foreign companies may face tax implications if their employees continue working from India during an extended stay.  

Employees working from India could create Service Permanent Establishment (Service PE) exposure for foreign companies if duration thresholds under relevant tax treaties are crossed. 

For example, the India-UAE tax treaty provides that a Service PE may arise if services are furnished in India for more than 9 months within a 12-month period. 

Conclusion 

The extended stay of Indians returning from West Asia due to geopolitical tensions may trigger tax implications based on residency status. Individuals and foreign companies must carefully assess their circumstances to avoid unintended tax consequences. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.