Stranded due to West Asia conflict? It may affect your tax residency status

Incorrect assessment of status and failure to fulfil tax-related obligations can have serious consequences

Geopolitical conflicts can sometimes disrupt travel plans and force individuals to remain in a country longer than intended. For instance, Indians travelling or working in West Asia may find their stay extended due to the ongoing Iran conflict, while NRIs based in the region may return to India and remain here for a prolonged period. Such unexpected changes in physical presence can potentially alter a person’s tax residency status and affect their tax obligations in India — raising questions about what individuals should do to stay compliant.

Key rules that determine tax residency in India

Tax residency in India is determined under Section 6 of the Income Tax Act, 1961, primarily based on the number of days an individual stays in India during a financial year. An individual is treated as a resident if they are in India for 182 days or more in that year, or for 60 days or more in the year and 365 days or more in the preceding four years.

 

“However, for Indian citizens leaving for employment abroad or crew members of Indian ships, and Indian citizens or persons of Indian origin visiting India, the 60-day condition is generally replaced with 182 days (or 120 days for those with Indian income exceeding ₹15 lakh). The law also includes a deemed residency rule for Indian citizens with income above ₹15 lakh who are not liable to tax in any other country,” says Neeraj Agarwala, senior partner, Nangia & Co LLP.

 

Residents are further classified as Resident and Ordinarily Resident (ROR) or Resident but Not Ordinarily Resident (RNOR), which determines whether their global income is taxable in India.

How can conflict-driven disruptions affect an Indian citizen’s tax residency?

If an Indian citizen working or travelling abroad is forced to remain outside India longer than planned due to conflict or travel restrictions, the extended stay could affect their tax residency in both countries. If their stay abroad exceeds the 182-day threshold under the foreign country’s rules, they may become a tax resident there, while still potentially qualifying as a resident under Indian law based on their stay in India during the relevant and preceding years.

 

“This could lead to dual residency, in which case the applicable Double Taxation Avoidance Agreement (DTAA) provides tie-breaker tests — such as permanent home, centre of vital interests, habitual abode, and nationality — to determine the country of residence for treaty purposes. Indian courts have also recognised that residency determinations should not always be applied mechanically when a person’s physical presence is due to circumstances beyond their control,” says Agarwala.

Can forced stays in India alter an NRI’s tax status?

India’s taxation depends on tax residency, which is determined solely by physical presence in the country, regardless of the reason for the stay. If NRIs are forced to remain in India longer due to travel disruptions, the extra days count toward residency calculations.

 

“If they cross the 60/120/182-day thresholds, they may become RNOR or ROR. While RNORs are taxed only on India-sourced income, RORs are taxed on global income, including foreign earnings, and must disclose foreign assets in tax returns. Any relaxation would apply only if specifically notified by the government, as during COVID-19,” says Mousami Nagarsenkar, partner, Deloitte India.

Have courts or the government granted relief in such cases?

Governments and tax authorities, including in India, recognise that extraordinary events such as pandemics, flight bans, or border closures can distort tax residency tests based on physical presence.

 

“During the COVID-19 pandemic, the Central Board of Direct Taxes issued Circular No. 11/2020, allowing certain days of forced stay in India — such as the period 22–31 March 2020 and specified quarantine days — to be excluded while determining tax residency. This ensured individuals stranded due to travel restrictions did not inadvertently become Indian tax residents,” informs Rajarshi Dasgupta, executive director, AQUILAW.

 

Later, Circular No. 2/2021 acknowledged similar concerns for FY20-FY21 but noted that blanket exclusions could create double non-taxation, suggesting relief may instead rely on treaty provisions and case-by-case evaluation. “Indian courts have also generally taken a substance-over-form approach in residency matters, considering factors such as intention, employment location, and treaty rules,” he adds.

Evidence to support involuntary stay

Tax authorities generally require objective evidence showing that the extended stay was beyond the individual’s control.

 

“Taxpayers should, therefore, keep records such as cancelled flight tickets, airline communications, passport and visa records, and immigration stamps, along with official travel advisories or restrictions. It is also important to retain proof of employment and economic ties abroad, including employment contracts, payroll records, work permits, accommodation details, and a Tax Residency Certificate (TRC) from the foreign country,” suggests Dasgupta.

 

Such documentation helps demonstrate that the individual’s primary base remained overseas and that the prolonged stay in India was involuntary, which can be important during tax assessments or treaty-based residency determinations.

How do DTAAs resolve dual residency?

Where an individual qualifies as a tax resident in two countries under domestic laws, the relevant Double Taxation Avoidance Agreement (DTAA) applies tie-breaker rules to determine a single country of residence for treaty purposes. “Most Indian treaties follow the OECD Model Convention, applying tests sequentially — permanent home, centre of vital interests (personal and economic ties), habitual abode, and nationality, with unresolved cases settled through the Mutual Agreement Procedure (MAP) between tax authorities,” says Dasgupta.

 

In practice, if an NRI spends extended time in India due to travel disruptions but continues to maintain employment and economic ties abroad, the treaty rules may still treat the individual as a resident of the foreign country, even if domestic stay thresholds such as India’s 182-day rule are crossed.

How to prepare for a possible residency change?

Taxpayers who believe their residency status may change due to an extended stay in India should take certain precautions. “They should closely track the number of days spent in India, as residency is determined based on physical presence. It is also advisable to maintain supporting documents such as passport copies, immigration stamps, boarding passes, cancelled flight records, travel advisories, or employer communications explaining the extended stay,” advises Dhruv Chopra, managing partner at Dewan P N Chopra and Co.

 

They should also review the potential taxability of global income, since foreign earnings may become taxable if they qualify as an Ordinarily Resident in India, and ensure proper disclosure of foreign assets and overseas bank accounts in tax filings where required. 

Key mistakes, compliance risks to avoid

 

• Failure to reassess residency each financial year
• Continuing to treat oneself as an NRI despite prolonged stay in India, ignoring possible shift to RNOR or ROR status
• Overlooking the different reporting obligations for Indian and foreign income and assets
• Incorrect tax return filing
• Risks include potential scrutiny by tax authorities
• Other risks include reassessment proceedings, penalties, interest liability, and double taxation
• Prosecution under the Black Money Act or Prevention of Money Laundering Act