Can Days spent towards Job Hunt Abroad included while calculating NRI Days ?

ITAT Ruling: Job Hunt Days Count for NRI Status—A Game-Changer for NRIs

For Non-Resident Indians (NRIs), tax residency in India is determined based on the number of days spent in the country. A recent ruling by the Income Tax Appellate Tribunal (ITAT) has settled an important question: Do job-hunting days abroad count toward maintaining NRI status?

This decision is a major relief for individuals seeking employment overseas, as it confirms that days spent searching for a job outside India should not be excluded from the NRI status calculation.

Background of the Case

The case involved Mr. Gulati, an individual who:

• Spent 210 days outside India during the assessment year 2016-17.

• 28 of those days were spent job-hunting abroad.

• The Indian tax authorities excluded these 28 days, claiming that only actual employment days should count toward NRI status.

The Tax Officer’s Initial Ruling

Based on this revised calculation, the Income Tax Department ruled that Gulati was a tax resident of India, leading to:

• ₹86.2 lakh in overseas salary and ₹2.8 lakh in interest income becoming taxable in India.

• The Appellate Commissioner upheld this view, arguing that only actual employment days count toward NRI status.

ITAT’s Landmark Ruling: A Win for NRIs

The ITAT overturned the tax department’s ruling, making the following key observations:

✅ Job-hunting days abroad should be counted for NRI status.

✅ Under Explanation 1 to Section 6(1) of the Income Tax Act, 1961, leaving India for the purpose of employment qualifies an individual as an NRI.

✅ Job searching is a legitimate step in the employment process, and thus, those days must be included in the NRI status calculation.

✅ Tax residency should be determined solely based on the number of days spent in India, without arbitrary exclusions.

Legal References Supporting the Ruling

1. Section 6(1) of the Income Tax Act, 1961

This section defines tax residency based on the number of days an individual spends in India during a financial year.

• An individual is classified as an NRI if they:

• Spend less than 182 days in India during the financial year, OR

• Have left India for the purpose of employment abroad.

• Explanation 1 to Section 6(1) states that leaving India for “the purpose of employment” includes all steps taken to secure employment, including job-hunting.

2. Precedents Set by Earlier Court Rulings

The ITAT ruling aligns with past judicial precedents where courts have emphasized that any period spent outside India for employment or job search should be counted for NRI status determination.

• Courts have previously rejected arbitrary exclusions made by tax authorities, reinforcing the principle that tax residency should be calculated based on actual physical presence in India.

Why This Ruling Matters for NRIs

🔹 Protection Against Unfair Taxation: This ruling prevents NRIs from being unfairly taxed on their global income when they spend time abroad searching for a job.

🔹 Greater Clarity in Tax Laws: The decision eliminates confusion on whether job search days qualify under employment purposes.

🔹 Prevention of Arbitrary Tax Decisions: ITAT has now made it clear that tax officers cannot exclude job search days when determining NRI status.

Key Takeaways for NRIs

✔ Tax-Free Overseas Income: NRIs do not pay tax on global income unless they lose their NRI status.

✔ 182-Day Rule: To maintain NRI status, an individual must spend at least 182 days outside India in a financial year.

✔ Job-Hunting Days Are Valid: If you travel abroad for a job search, those days are now officially recognized as counting toward NRI status.

Conclusion

The ITAT’s ruling is a significant relief for NRIs and expatriates, ensuring that job-hunting abroad is recognized as part of the employment process. This decision protects NRIs from unfair tax burdens and provides legal clarity, preventing arbitrary exclusions by tax authorities.

With this ruling, NRIs can now plan their job search and stay abroad without fear of unexpected taxation on their global income.