Latest news with #M.Mahadevan
Mint
8 hours ago
- Business
- Mint
How to track your days in India—and why it matters more than ever for your tax status
Renowned entrepreneur M. Mahadevan, popularly known as 'Hot Breads Mahadevan' for his international bakery and restaurant chain, has run into tax trouble back home. A recent Income Tax Appellate Tribunal (ITAT) ruling declared Mahadevan a tax resident of India for financial years 2012-13, 2013-14, and 2018-19, thereby making his global income taxable in India—despite his claim of being a non-resident. Mahadevan, who operates restaurants and bakeries both in India and abroad, declared himself a non-resident in his income tax filings for the aforementioned years. He based this status on his interpretation of passport stamps, asserting that he had stayed less than 182 days in India in each relevant year. As a non-resident, he only paid tax on Indian-sourced income, leaving his overseas earnings out of the tax net. Also read: NRI taxation: How to claim special tax concessions However, a detailed review by the tax department—using passport records, visa copies, and data from the Foreigner Regional Registration Office (FRRO)—suggested otherwise. The officer concluded that Mahadevan exceeded the 182-day threshold in FY13 and FY14, and also met the 60-day-plus-365-days condition for FY19, thereby qualifying him as a tax resident under India's Income-tax Act, 1961 (ITA). Importantly, Mahadevan's travel was under 'social' or 'visitor' visa categories, not business or employment—further undermining his claim of leaving India for professional reasons. Mahadevan challenged the tax officer's ruling at the first appellate level, where he found relief. The appellate authority ruled in his favour, interpreting his overseas trips as business-related despite the visa types. It accepted his stay in India to be under the threshold and upheld his non-resident status, exempting his foreign income from taxation. On further appeal, the ITAT clubbed the cases and overturned the appellate ruling. It agreed with the tax department, affirming that Mahadevan was a resident for those years and his foreign income was liable to Indian tax. Still, the Tribunal offered some relief: if Mahadevan could furnish proof of foreign taxes paid, foreign tax credit would be allowed. Why the tribunal ruled against Mahadevan FRRO data as credible proof: The Tribunal trusted FRRO records as reliable government data for determining days of stay. Visa purpose matters: Frequent travel abroad did not equate to business if the visa stated otherwise. Since Mahadevan's visas were for social visits, he could not claim the 182-day exception allowed for business departures. UAE Tax Residency Certificate (TRC): Mahadevan produced a UAE TRC issued in 2021 for earlier years. The Tribunal held that under the India-UAE tax treaty, treaty benefits cannot apply if a person qualifies as a tax resident of India under domestic law. Also read: Decoding dual taxation: What NRIs need to know for better tax efficiency Key lessons for global Indians Residential status is pivotal in determining tax liability and must be backed by appropriate records. Count days with care An individual's residential status determines their tax liability in India and is primarily based on days spent in the country. While passport stamps are usually relied on, it's advisable to cross-check stay records with FRRO data to avoid mismatches that may affect tax residency. Involuntary stays (e.g., passport seizures) are excluded. For land entries from Nepal or Bhutan, where passports/visas aren't required, documents like hotel receipts can help establish duration of stay. Who is a resident? A person is considered a resident in India if they: The 60-day threshold is relaxed to 120 or 182 days for: Visa type matters Residency status can also depend on the visa category used for travel. A person leaving India for work should not use tourist or social visas, as these may not support claims of business-related travel abroad under tax laws. Dual residency & tie-breaker If you're classified as a resident in both India and another country, tax treaties apply a tie-breaker test. This considers: This helps decide which country can tax your global income. Also read: Golden tax window for NRIs: What RNOR means and how to use itAshish Karundia, founder, Ashish Karundia & Co., Chartered Accountants
Economic Times
10-06-2025
- Business
- Economic Times
Don't mix business with tourist visas, affirms tax tribunal ruling
Mumbai: The perils of travelling on a tourist visa for business purposes may not be confined to run-ins with foreign authorities. Sometimes it could even spell trouble with the local taxman. Indian businessmen who spend months abroad to look after overseas interests and carefully preserve their NRI status, may even find themselves in a spot if the tax authorities question their 'residency' status due to the type of visas approved by countries they travelled to. Recently, a tribunal has upheld the Income Tax (I-T) department's decision to tax the 'global income' of the bakery chain Hot Breads founder who, according to the tax office was a 'resident' for certain years, and not an NRI as claimed by the Chennai-based relaxation on the period of stay given to someone who was abroad for employment or business was denied to Mahadevan as he had travelled on tourist visas. His argument that the visits were purely in connection with his businesses in multiple countries was rejected by the Chennai bench of the I-T Appellate Authority, a quasi-judicial authority. (Join our ETNRI WhatsApp channel for all the latest updates) Mahadevan to Move Court When contacted, a family member speaking on behalf of Mahadevan, said, "We are currently reviewing the order of the Hon'ble ITAT in detail. While we are disappointed with the outcome, we believe we have a strong case on merits and are considering all available legal options. We remain committed to full compliance with all applicable laws and regulations and will continue to cooperate with the authorities as required."The residency status of an individual is determined by the rules on the number of days spent. If someone stays for 182 days or more in India, he is considered as a resident whose global income (along with local earnings) for that year may be taxed in India. Alternatively, if a person spends at least 60 days in a year and a total of 365 days in the previous four years, he too is treated as a tax the second rule extends a partial exemption to those travelling overseas for jobs or self-employment. For them, the minimum period of stay is 182 days instead of 60. This relief was not given to number of days are typically counted on the basis of the timing-stamp on passports. The tax office, however, obtained the information from the Foreigners Regional Registration Office (FRRO)-a practice that was upheld by the Tribunal. Based on the FRRO data, the I-T department claimed that Mahadevan had spent 182 days or more in the assessment years 2013-14, 2014-15, and if the duration of stay were less than 182 days, Mahadevan's overseas travels would not have been considered to treat him as a resident-thanks to his tourist visas and despite his argument that a person would not travel a country frequently for tourism. The tribunal held that every country restricts visas for specific purposes."The decision underscores the importance of holding the correct visa category, as an inappropriate visa can jeopardize an individual's residential status and complicate the taxation of the global income in India. Nevertheless, if it can be factually established that the individual left India for the purpose of conducting business and genuine business activities were indeed undertaken abroad (though under an inappropriate visa), then the benefit of extending the 60-day period to 182 days under Explanation 1(a) to Section 6(1) of the I-T Act should be granted. However, it is important to note that such a benefit is available only when the individual 'leaves' India for the purpose of employment or business and not 'visiting' abroad in connection with business," said Ashish Karundia, founder of the CA firm Ashish to Rajesh Shah, partner of Jayantilal Thakkar & Co, "A resident Indian becomes non-resident only if they go abroad for employment, including self-employment. Simply staying outside India for 182 days does not make anyone a non-resident. The type of visa is equally important. But this is ignored-either due to ignorance or for convenience." The ruing implied that an assessee cannot avoid tax on global earnings merely because he runs businesses abroad. Countering ITAT's decision to disregard the tax residency certificate issued by the UAE to Mahadevan, Harshal Bhuta, partner at the CA firm PR Bhuta & Co, said "An individual staying in the UAE for over 183 days in a calendar year qualifies as a resident of UAE under the India-UAE DTAA (tax treaty), irrespective of the purpose of stay. In cases of dual residency, the treaty's tie-breaker rules must apply and the treaty-based residency cannot be summarily disregarded."
Time of India
10-06-2025
- Business
- Time of India
Don't mix business with tourist visas, affirms tax tribunal ruling
Live Events Mumbai: The perils of travelling on a tourist visa for business purposes may not be confined to run-ins with foreign authorities. Sometimes it could even spell trouble with the local businessmen who spend months abroad to look after overseas interests and carefully preserve their NRI status , may even find themselves in a spot if the tax authorities question their 'residency' status due to the type of visas approved by countries they travelled a tribunal has upheld the Income Tax (I-T) department's decision to tax the 'global income' of the bakery chain Hot Breads founder who, according to the tax office was a 'resident' for certain years, and not an NRI as claimed by the Chennai-based relaxation on the period of stay given to someone who was abroad for employment or business was denied to Mahadevan as he had travelled on tourist visas. His argument that the visits were purely in connection with his businesses in multiple countries was rejected by the Chennai bench of the I-T Appellate Authority, a quasi-judicial authority.(Join our ETNRI WhatsApp channel for all the latest updates)When contacted, a family member speaking on behalf of Mahadevan, said, "We are currently reviewing the order of the Hon'ble ITAT in detail. While we are disappointed with the outcome, we believe we have a strong case on merits and are considering all available legal options. We remain committed to full compliance with all applicable laws and regulations and will continue to cooperate with the authorities as required."The residency status of an individual is determined by the rules on the number of days spent. If someone stays for 182 days or more in India, he is considered as a resident whose global income (along with local earnings) for that year may be taxed in India. Alternatively, if a person spends at least 60 days in a year and a total of 365 days in the previous four years, he too is treated as a tax the second rule extends a partial exemption to those travelling overseas for jobs or self-employment. For them, the minimum period of stay is 182 days instead of 60. This relief was not given to number of days are typically counted on the basis of the timing-stamp on passports. The tax office, however, obtained the information from the Foreigners Regional Registration Office (FRRO)-a practice that was upheld by the Tribunal. Based on the FRRO data, the I-T department claimed that Mahadevan had spent 182 days or more in the assessment years 2013-14, 2014-15, and if the duration of stay were less than 182 days, Mahadevan's overseas travels would not have been considered to treat him as a resident-thanks to his tourist visas and despite his argument that a person would not travel a country frequently for tourism. The tribunal held that every country restricts visas for specific purposes."The decision underscores the importance of holding the correct visa category, as an inappropriate visa can jeopardize an individual's residential status and complicate the taxation of the global income in India. Nevertheless, if it can be factually established that the individual left India for the purpose of conducting business and genuine business activities were indeed undertaken abroad (though under an inappropriate visa), then the benefit of extending the 60-day period to 182 days under Explanation 1(a) to Section 6(1) of the I-T Act should be granted. However, it is important to note that such a benefit is available only when the individual 'leaves' India for the purpose of employment or business and not 'visiting' abroad in connection with business," said Ashish Karundia, founder of the CA firm Ashish to Rajesh Shah, partner of Jayantilal Thakkar & Co, "A resident Indian becomes non-resident only if they go abroad for employment, including self-employment. Simply staying outside India for 182 days does not make anyone a non-resident. The type of visa is equally important. But this is ignored-either due to ignorance or for convenience." The ruing implied that an assessee cannot avoid tax on global earnings merely because he runs businesses ITAT's decision to disregard the tax residency certificate issued by the UAE to Mahadevan, Harshal Bhuta, partner at the CA firm PR Bhuta & Co, said "An individual staying in the UAE for over 183 days in a calendar year qualifies as a resident of UAE under the India-UAE DTAA (tax treaty), irrespective of the purpose of stay. In cases of dual residency, the treaty's tie-breaker rules must apply and the treaty-based residency cannot be summarily disregarded."
