Finance minister Nirmala Sitharaman on Friday allowed discounting of prolonged stay period in the country for determining the residency status, to provide relief to people who may have technically become residents as per income tax rules due to travel restrictions and are forced to offer their global income to tax here.
In a circular, the Central Board of Direct Taxes (CBDT) said it would exclude the period of stay of such people up to the date of normalisation of international flight operations and their departures from India, while determining the residency status.
The board’s decision comes after it considered various representations received from people who had to prolong their stay in India due to the lockdown and suspension of international flights. They had expressed concerns that they would be required to file tax returns as Indian residents under Section 6 of the Income-Tax Act, the CBDT said in a statement.
For FY 2019-2020, the board said it would discount the days from March 22, when international flights were suspended, till March 31 where an individual had not been able to leave India.
In case where an individual who has been quarantined in India on or after March 1, and has departed on an evacuation flight on or before March 31, or has been unable to leave India, the period of stay from the beginning of quarantine to the date of departure, or March 31, shall not be taken into account.
In case where an individual has departed on an evacuation flight on or before March 31, his period of stay in India from March 22 till the date of departure shall not be taken into account.
The board will issue a separate circular for FY21 after the flight operations resumed, it said, while noting that the lockdown was still continuing and clarity on resumption of international flights was awaited.
Experts said the move would bode well for many foreigners or NRIs who had to stay back in India due to the travel restrictions.
“This is a much welcome and awaited circular, which takes cognisance of concerns of NRIs and other foreigners who arrived in India but could not return,” Nangia Andersen Consulting director Shailesh Kumar said. “One may expect a similar circular for FY 2020-21, providing exclusion of lockdown period for FY 2020-21 as well for determining the residential status,” he added.
“Given that there is lot of uncertainty still persisting around Covid-19 lockdown/travel restriction, it will be in the fitness of the things if the government can defer the amended law concerning the number of days’ presence in India for FY 20-21 by at least a year,” Sanjay Sanghvi, a partner at Khaitan & Co, said.
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