NRI tax dispute: How Section 6 residency rules cost Binny Bansal his tax appeal

The Income Tax Appellate Tribunal (ITAT) in Bengaluru has dealt a significant setback to Flipkart co-founder Binny Bansal, ruling that he cannot be treated as a non-resident for tax purposes and is therefore not entitled to benefits under the India–Singapore Double Taxation Avoidance Agreement (DTAA). The decision clears the way for Indian tax authorities to levy capital gains tax on profits he earned from selling shares linked to Flipkart during the financial year 2019–20.

What's the case

Bansal had argued that after stepping down as Flipkart CEO in November 2018 and moving to Singapore in February 2019 for employment, he should qualify as a non-resident who merely visited India. He said he lived and worked in Singapore, held employment visas there, and that his wife and children were also based overseas. In his tax filings, he maintained that he spent only 141 days in India during FY2019–20 and therefore should not be taxed in India on gains from selling shares in Flipkart Private Limited, a Singapore-incorporated entity.

However, the ITAT rejected this position. In a detailed order dated January 9, the tribunal held that Bansal satisfied the residential test under Section 6(1)(c) of the Income Tax Act because he had stayed in India for more than 60 days during the relevant year and had been a resident in earlier years. This, the tribunal said, made him an Indian resident for tax purposes, rendering his DTAA claim ineffective.

The dispute centred on transactions in FY2019–20, when Bansal sold shares of Flipkart Pvt Ltd, Singapore, in three tranches in August and November 2019. The Income Tax Department taxed Rs 162.54 crore from these sales as long-term capital gains in India. Bansal contested this, arguing that under Indian law and treaty provisions, the income should be taxable only in Singapore.

What went wrong

Tax advisory platform Tax Buddy, which analysed the ruling, said the core issue was the interpretation of residency rules under Section 6 and its explanations. Bansal relied on Explanation 1(b), which extends the usual 60-day test to 182 days for individuals who are “being outside India and come on a visit.” He argued that “being outside India” simply meant working abroad, not necessarily holding non-resident status in the past.

The tax department, however, countered that the provision applies only to those who were already non-residents in preceding years. Since Bansal had been a resident earlier, the tribunal agreed that he could not claim this relaxation. His alternative argument under Explanation 1(a), which applies when a person leaves India for employment abroad, also failed because he moved in February 2019 — a different financial year from the one under review.

The tribunal further examined his claim under the India–Singapore DTAA. Applying the treaty’s tie-breaker rules, it concluded that Bansal’s permanent home and key economic interests remained in India, and that the value of Flipkart shares stemmed primarily from Indian operations. As a result, even under treaty standards, he was treated as an Indian resident.

With this finding, DTAA protection fell away, and the tribunal confirmed that the Rs 162.54 crore in capital gains from the Flipkart share sale was taxable in India. While the ITAT directed tax authorities to verify and reissue a pending refund of over Rs 5.8 crore if due, the main tax demand stands. Bansal, who later went on to found AI-driven commerce venture Oppdoor, retains the option to challenge the ruling in a higher court, setting the stage for a potentially significant precedent on cross-border tax residency disputes.