The Central Board of Direct taxes (CBDT) had received various representations requesting for relaxation in determination of residential status for previous year 2020-21 from individuals who had come on a visit to India during the previous year 2019-20 and intended to leave India but could not do so due to suspension of international flights. The matter has been examined by CBDT and accordingly taken into the cognizance and the Board has notified Circular No. 2/2021 dated 03/03/2021 which intends to adress the above representations in respect to Residential status of certain individuals under Income-tax Act, 1961.
Vide the said Circular, it has cleared out the air of doubts which arose after people taking the aspects of Possibilities of dual non-residency in case of general relaxation into the consideration.
Earlier, CBDT vide Circular No. 11/2020 dated 08.05.2020 issued clarification over residency under Section 6 of the Income Tax Act, 1961. Circular clarified that the lockdown period will not be counted to determine NRIs residency status for the purpose of computation of tax liabilitydue to nationwide lockdown imposed in order to curb the spread of COVID-19 for the financial year (FY) 2019-20.
Now, If general relaxation for the stay period of 182 days is provided, there may be cases of double non-residency. In such situation, a person may not become a tax resident in any country in PY 2020-21 even after staying for more than 182 days or more in India resulting in double non-taxation and end up not paying tax in any country
However, due to applicability of Double Taxation Avoidance Agreement (DTAA), such person will become resident of only one country as per the "tie breaker rule" in the DTAA.
Therefore, if any individual is facing double taxation even after taking into consideration the relief provided by the respective DTAAs, he may furnish the information in Form - NR annexed to the aforementioned circular by 31st March, 2021.This form is to be submitted electronically to the Principal Chief Commissioner of Income-tax (International Taxation).
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