The Central Board of Direct Taxes (CBDT), on Friday, issued Circular No. 11/2020 in respect to Clarification over residency under Section 6 of the Income Tax Act, 1961.Circular clarifies that the lockdown period will not be counted to determine NRIs residency status for the purpose of computation of tax liability
Section 6 of the Income-tax Act, 1961 (the Act) contains provisions relating to residency of a person. The status of an individual as to whether he is resident in India or a non-resident or not ordinarily resident, is dependent, inter-alia, on the period for which the person is in India during a year.
Non-resident Indians (NRIs) who came to the country before the lockdown, do not have an option to return till travel restrictions are lifted. However, the number of days this NRIs stay in India decides their onus of income-tax compliance. Recent amendments introduced by the Finance Act 2020 related to the tax residency rules can be a concern for some NRIs.
“Various representations have been received stating that there are a number of individuals who had come on a visit to India during the previous year 2019-20 for a particular duration and intended to leave India before the end of the previous year for maintaining their status as a non-resident or not ordinarily resident in India,” the circular said.
However, due to the declaration of the lockdown and suspension of international flights owing to the outbreak of Novel COVID-19, they are required to prolong their stay in India. Concerns have been expressed that this extra stay in India may make them a resident of India under section 6 of the Act.
In order to avoid genuine hardship in such cases, the Board, in the exercise of powers conferred under section 119 of the Act, has decided that for the purpose of determining the residential status under section 6 of the Act during the previous year 2019-20 in respect of an individual who has come to India on a visit before 22nd March 2020.
“The individuals who have been unable to leave India on or before 31″ March 2020, his period of stay in India from 22 March 2020 to 31 March 2020 shall not be taken into account; or has been quarantined in India on account of Novel Corona Virus (Covid-19) on or after 1″ March 2020 and has departed on an evacuation flight on or before 31″ March 2020,” the circular stated.
As per the clarifications, “the individual who has departed on an evacuation flight on or before 31″ March 2020, his period of stay in India from 22nd March 2020 to this date of departure shall not be taken into account.”
Click here to View Circular : Circular No. 11/2020
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