Flight cancellations and airspace limitations impacting major Gulf transit points like Dubai, Abu Dhabi, and Doha have thrown travel plans into disarray for thousands of passengers, including foreign nationals and Gulf-based residents who had made short visits to India.
While the immediate worry for travellers remains postponed departures and unpredictable flight patterns, tax professionals caution that extended stays in India due to these disturbances could unintentionally impact a person’s tax residency status according to Indian law—a change that could have substantial financial repercussions.
Deepesh Chheda, Partner at Dhruva Advisors, states that prolonged travel disruptions may introduce an overlooked tax hazard: “Flights delayed, residency triggered—a surprising outcome where those expecting a brief stay may find themselves unintentionally exceeding India’s statutory day-count limits for tax residency.”
The significance of an extended stay for tax reasons
According to the Income Tax Act, 1961, particularly Section 6, an individual’s tax residency in India is mainly determined by the number of days spent in the country throughout a financial year (April–March).
In general, an individual may qualify as an Indian tax resident if:
- They stay 182 days or more in India during a financial year, or
- They stay 60 days or more in the relevant year and 365 days or more in the four preceding financial years.
These benchmarks are largely objective, focusing primarily on physical presence. As a result, travellers facing delayed return flights due to cancellations or restricted airspace might inadvertently exceed these limits.
In practical terms, residency status dictates the extent of income that India can tax. While non-residents are generally taxed only on income generated in India, residents could be taxed on a wider array of income depending on their classification.
Consequences of exceeding the threshold
If an individual’s stay surpasses the legal thresholds, Indian tax law may categorize them as a resident for that financial year. However, not all residents are treated equally.
Resident but Not Ordinarily Resident (RNOR)
Many non-resident Indians (NRIs) who have lived abroad for extended periods may qualify for RNOR status if they have been non-resident for nine out of the last ten financial years. Those in this category are primarily taxed on income earned or received in India, with most foreign income remaining outside the Indian tax purview.
Resident and Ordinarily Resident (ROR)
If the RNOR conditions are not met—such as if the individual has spent significant time in India in recent years—they may be categorized as Resident and Ordinarily Resident. This status carries broader implications, as global income could potentially become taxable in India.
For individuals with employment, investments, or business operations abroad, the distinction between RNOR and ROR can greatly impact their tax obligations.
Risk of dual residency
Another issue that may arise is dual tax residency, where two nations treat the same individual as a tax resident.
For example, a professional residing and working in the Gulf but becoming a tax resident of India due to a prolonged stay may still be seen as a resident under the domestic tax regulations of their employment country.
This is where international tax treaties become essential. India has Double Taxation Avoidance Agreements (DTAAs) with various nations, including the United Arab Emirates and Saudi Arabia.
These treaties include tie-breaker clauses to determine which country has the jurisdiction to consider the individual as a resident for treaty purposes. The evaluation typically follows a series of tests:
- Permanent home: Where does the individual maintain a permanent residence?
- Centre of vital interests: Where are personal and economic connections stronger?
- Habitual abode: Where does the person generally reside?
Among these, the “centre of vital interests” assessment usually proves to be decisive. Tax authorities often examine the location of the individual’s employment, family, and primary economic activities.
In many instances, someone who has lived and worked in the Gulf for years may still be recognized as a resident of that region under treaty terms, even if they temporarily exceed India’s day-count limits due to unusual situations. Nevertheless, tax experts caution that such determinations are fact-specific and require thorough analysis.
A practical illustration
Imagine a professional working in Dubai who travels to India for a short visit in April 2026 with plans to return within weeks. If geopolitical tensions result in airspace restrictions that delay their return for several months, their stay could surpass 182 days within the financial year.
In this scenario, the individual may technically qualify as an Indian tax resident under local law—despite the fact that their employment, home, and economic interests lie overseas.
Treaty provisions may ultimately clarify the dual residency issue, but this situation could still lead to compliance responsibilities like tax return filing or foreign asset reporting.
Company risks as well
The ramifications of travel disruptions extend beyond individuals. Tax specialists indicate that corporate entities may also face risks under certain conditions.
One significant area of concern involves Place of Effective Management (POEM)—a concept used to establish a company’s tax residency. If high-ranking executives from a foreign company become stranded in India and begin making key strategic choices or conducting board meetings from the country, tax authorities might argue that the company’s effective management is now in India.
If such a determination is made, the foreign company could be regarded as an Indian tax resident, pulling its global income into the Indian tax framework.
A similar matter may occur for foreign partnership firms. Under Indian tax regulations, a partnership is usually classified as non-resident if its control and management are entirely based outside India. However, if partners stuck in India start exercising management roles from within the country, tax authorities might contend that control is no longer completely outside India.
The importance of documentation
Experts recommend keeping documentation that illustrates the involuntary nature of the extended stay, including:
- Original flight reservations
- Airline cancellation or rescheduling notifications
- Passport entry and exit stamps
- Travel advisories or airline communications
- Correspondence with employers concerning delayed travel
Such evidence may aid in proving that the extended stay in India stemmed from circumstances beyond the individual’s control.
Lessons from past crises
A similar predicament arose during the global travel restrictions imposed by the COVID-19 pandemic, when numerous travellers found themselves stranded worldwide.
During this period, the Central Board of Direct Taxes introduced relief measures, excluding certain spans of enforced stay in India from residency calculations. This action acknowledged that extraordinary conditions could impose unintended compliance challenges.
Whether a similar leniency will be administered in the current context is uncertain. However, the previous precedent indicates that tax authorities have recognized the importance of flexibility during exceptional disruptions.
The importance of a few extra days
Travel disruptions are often seen as logistical challenges. Yet under tax law, every additional day spent in a country can bring legal consequences.
For travellers stuck in India due to the unfolding West Asia situation, a short visit could—on paper—trigger tax residency. Until clearer policy guidance is provided, experts advise that individuals should meticulously monitor their day count and retain records of travel disruptions.
In the calculation of tax residency, even a few unexpected days can have a significant impact.
