Flight cancellations and airspace limitations impacting key Gulf transit hubs like Dubai, Abu Dhabi, and Doha have disrupted travel plans for thousands, including foreign nationals and Gulf residents visiting India for short stays.
While the primary concern for travellers remains delayed flights and uncertain schedules, tax experts caution that extended stays in India due to these disruptions could inadvertently change an individual’s tax residency status as per Indian law — a shift that could have significant financial repercussions.
Deepesh Chheda, Partner at Dhruva Advisors, notes that prolonged travel interruptions may lead to an overlooked tax risk: “Disrupted flights can trigger residency — an unintended result where individuals who planned a short visit might inadvertently exceed India’s statutory day-count limits for tax residency.”
Why an extended stay can affect tax status
According to the Income Tax Act, 1961, particularly Section 6, an individual’s tax residency in India is primarily determined by the number of days spent in the country during a financial year (April–March).
Generally, an individual may be deemed an Indian tax resident if:
- They are in India for 182 days or more during a financial year, or
- They are in India for 60 days or more during the relevant year and for 365 days or more in the preceding four financial years.
These thresholds are largely straightforward, relying primarily on physical presence. Therefore, travellers whose return flights are delayed due to cancellations or restricted airspace might unintentionally exceed these limits.
In practical terms, one’s residency status defines the extent of income that India can tax. Non-residents are typically taxed only on income sourced from India, whereas residents may be subject to tax on a wider range of earnings based on their classification.
What occurs if you exceed the threshold?
If an individual’s stay surpasses the statutory limits, Indian tax law may classify 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) living abroad for extended periods may qualify for RNOR status if they have been non-resident in nine out of the last ten financial years. Individuals in this category are taxed mainly on income earned or received in India, with most foreign income remaining outside the scope of Indian taxation.
Resident and Ordinarily Resident (ROR)
If the RNOR conditions are not met — for instance, if the individual has spent considerable time in India recently — they may be classified as Resident and Ordinarily Resident. This classification carries broader implications since global income could be taxable in India.
For individuals with jobs, investments, or business interests abroad, the distinction between RNOR and ROR can significantly impact their tax liability.
The risk of dual residency
Another issue that may arise is dual tax residency, where two countries concurrently consider the same individual as a resident for tax purposes.
For example, a professional living and working in the Gulf who becomes a tax resident of India due to an extended stay might still be recognized as a resident under domestic tax laws of their country of employment.
This is where international tax treaties play a crucial role. India has Double Taxation Avoidance Agreements (DTAAs) with various jurisdictions, including the United Arab Emirates and Saudi Arabia.
These treaties contain tie-breaker clauses that determine which country can ultimately classify the individual as a resident for treaty purposes. The analysis usually follows a sequence of tests:
- Permanent home: Where does the individual maintain a permanent residence?
- Centre of vital interests: Where are their personal and economic ties stronger?
- Habitual abode: Where does the individual normally reside?
Among these, the “centre of vital interests” test often proves decisive. Tax authorities typically assess where the individual’s employment, familial ties, and primary economic activities are concentrated.
In many instances, someone who has been living and working in the Gulf for years may still be regarded as a resident of that jurisdiction under treaty rules, even if they temporarily exceed India’s day-count limits due to exceptional situations. However, tax experts warn that such determinations are fact-specific and necessitate careful consideration.
A practical scenario
Consider a professional working in Dubai who visits India for a short trip in April 2026, intending to return within a few weeks. If regional airspace restrictions related to geopolitical issues delay their return for several months, the individual’s stay could surpass 182 days during the financial year.
In this scenario, they may technically qualify as an Indian tax resident under national law — even though their employment, home, and economic interests lie overseas.
Treaty provisions may eventually clarify the dual residency issue, but the situation could still impose compliance obligations such as filing tax returns or reporting foreign assets.
Corporate risks as well
The effects of travel disruptions are not confined to individuals. Tax specialists highlight that corporate entities may also encounter exposure in specific circumstances.
One area of concern involves Place of Effective Management (POEM) — a concept used to establish the tax residency of companies. If senior executives of a foreign company become stranded in India and begin making essential strategic decisions or conducting board meetings from there, tax authorities could argue that the company’s effective management is now in India.
If this perspective is adopted, the foreign company may be classified as an Indian tax resident, thereby bringing its global income under Indian taxation.
A similar issue could arise for foreign partnership firms. Under Indian tax law, a firm is generally considered non-resident if its control and management are entirely outside India. However, if partners stranded in India start exercising management functions from within the country, tax authorities could assert that control is no longer wholly outside India.
The importance of documentation
For travellers facing prolonged stays due to flight disruptions, keeping documentation can become an essential protective measure.
Experts recommend retaining records that demonstrate the involuntary nature of the extended stay, including:
- Original flight reservations
- Notices of cancellations or rescheduling from airlines
- Passport entry and exit stamps
- Travel advisories or communications from airlines
- Correspondence with employers regarding delayed travel
Such documentation may assist in establishing that the extended stay in India resulted from circumstances beyond the individual’s control.
Insights from the pandemic
A related challenge emerged during the global travel shutdown caused by the COVID-19 pandemic when numerous travellers were stranded across borders.
During that period, the Central Board of Direct Taxes implemented relief measures that excluded certain durations of enforced stay in India from residency calculations. This decision recognized that extraordinary circumstances could impose unintended compliance obligations.
It remains uncertain whether similar relaxations will be introduced in the current context. However, the precedent indicates that tax authorities have previously acknowledged the necessity for flexibility during exceptional disruptions.
When extra days become significant
While travel disruptions are generally seen as logistical inconveniences, under tax law, each additional day spent in a country can have legal implications.
For those stranded in India due to the evolving West Asia situation, a brief visit could — theoretically — trigger tax residency. Until clearer policy guidance is provided, experts recommend individuals meticulously track their day count and maintain documentation related to travel disruptions.
In the calculations of tax residency, even an unexpected few days can lead to significant differences.
