It's entirely possible to be a tax resident of both India and the US in the same year under each country's own domestic rules — for instance, meeting the US substantial presence test while also crossing India's residency day-count thresholds during a transition year. When that happens, both countries could in theory tax your worldwide income, which is exactly the double-residency problem Article 4 of the India-US Double Taxation Avoidance Agreement (DTAA) is built to solve for individuals. Article 4 doesn't ask which country you'd rather be a resident of — it applies a fixed, sequential set of tests, and you stop at the first one that produces a clear answer.
Step One: Permanent Home
The first test asks where you have a "permanent home available to you" — a dwelling you can access continuously, as distinct from a place you stay only occasionally (a relative's spare room on a short visit doesn't count the same way an owned or long-term-leased home does). If a permanent home is available in only one of the two countries, that settles it immediately and the analysis stops there. It's only when a permanent home is available in both countries — a common situation for NRIs who own property in India while also maintaining a residence in the US — that you move to the next test.
Step Two: Center of Vital Interests
If a permanent home exists in both countries, the tie-breaker turns to where your personal and economic relations are closer — your "center of vital interests." This is a genuinely factual, weighted inquiry rather than a bright-line rule. On the personal side, the location of your immediate family (spouse and dependent children) generally carries more weight than extended family or social ties. On the economic side, active involvement in business or employment — where you actually work, manage property, or draw a salary — is generally weighted more heavily than passive holdings like a portfolio of investments sitting in one country. Indian tribunals applying this test have repeatedly emphasized nucleus-family location and active business/employment ties over passive investment presence.
Center of vital interests resolves a large share of real dual-residency disputes, because it's rare for someone's family and primary economic activity to be evenly split between two countries in a way that produces a genuine tie.
Steps Three Through Five: Habitual Abode, Nationality, Mutual Agreement
If center of vital interests can't be determined either — or if no permanent home was available in either country at step one — the test moves to habitual abode: which country you stay in more habitually, looked at over a meaningful period rather than a single year in isolation. If that's still a tie (or you have a habitual abode in neither country), residency is assigned based on nationality — which of the two countries you hold citizenship of. And in the rare case where you're a national of both countries, or neither, the treaty punts the question to the competent authorities of India and the US to resolve directly through a mutual agreement procedure (MAP) — a government-to-government negotiation, not something an individual filer resolves alone on a return.
In practice, very few real cases reach step four or five; most are resolved at the permanent-home or center-of-vital-interests stage. But because the test is sequential, you can't skip ahead — a filer with a permanent home in only one country never even reaches the vital-interests analysis, regardless of where their family or business happens to be.