CBDT issues Clarification on Residential Status for NRIs amid COVID-19 lockdown

cbdt-issues-clarification-on-residential-status-for-nris-amid-covid-19-lockdown

CBDT issues Clarification on Residential Status for NRIs amid COVID-19 lockdown: CBDT has issued a Circular No. 11/2020 dated 08.05.2020 and issued a clarification in respect of residency under section 6 of the Income-tax Act,1961 for Non-Resident Indians (NRIs) and foreign nationals who stranded in India due to nationwide lockdown imposed in order to curb the spread of COVID-19.

This clarification or order is issued for determining the residential status for the FY 2019-20.

In a tweet, the CBDT informed that the Government has given relief on residency status to NRIs/foreign visitors whose stay in India got prolonged due to lockdown. Prolonged stay in India to be discounted. 

CBDT issues Circular No. 11 dated 8th May, 2020 clarifying residential status u/s 6 of the Income Tax Act w.r.t. F.Y. 2019-20.

It is further informed that Circular for determining the residential status in such cases for Financial Year 2020-21 would be issued in due course, depending upon normalisation of/resumption of international flights.

As we are aware that the Income Tax Act, 1961 has been amended by the Finance Act, 1961 to reduce the number of days of visit in India from 182 days to 120 days in case of a non-resident Indian citizen or a person of Indian origin (PIO) and whose total income other than income from foreign sources exceeds Rs. 15 Lakh during the current financial year. 

However, in case of a non-resident Indian citizen or a PIO, whose total income other than income from foreign sources does not exceed Rs. 15 Lakh during the current financial year can stay up to 181 days and he will not lose his non-resident status.

Further, a foreign citizen can stay up to 59 days in India on a visit.

In any case, if any citizen, whether Indian or foreign, stays in India for a period of 182 days or more then he will become resident in India.

Once a person becomes resident in India, he will be liable to pay tax in India on his global income. In contrast, a non-resident is liable to pay tax in India only on Indian income and not on his global income.

Those who come on a visit to India in March 2020 must have come on certain planned days. However, due to the unprecedented COVID-19 outbreak, all international flights have been suspended all over the world. India has also restricted its International flights from March 22. As a result, many foreign citizen and NRIs have been stranded in India even after the expiry of their visa period. The Indian government has extended the visa of all those people whose visas have expired and who have been stranded in India because of the spread of coronavirus in many parts of the world and also due to travel restrictions imposed by the Indian authorities.

This would have resulted in an increase in their number of days of stay in India which may affect their residential status for which they were unplanned causing undue hardships to them.

In order to mitigate the hardships of these individuals, the CBDT has issued the order u/s 119 vide this Circular.

The Circular states that the Board has received various representations where a large number of individuals who have come on a visit to India during the previous year 2019-20 for a particular duration and intended to leave India before March 31, 2020 to maintain their status as 'non-resident' or 'not ordinary resident' in India could not do so due to declaration of the lockdown and suspension of international flights owing to an outbreak of Novel Coronavirus.

Their extra stay in India may make them a resident of India under section 6 of the Act. Therefore, in order to avoid the genuine hardship, the CBDT has issued an order u/s 119 vide this circular to exclude the period of stay in India of that individual who could not leave India due to COVID-19 pandemic from his total period of stay in India. 

The circular provided for in respect of an individual who has come to India on a visit before 22nd March, 2020 and: 

(a) has been unable to leave India on or before 31st March, 2020, his period of stay in India from 22nd March, 2020 to 31st March, 2020 shall not be taken into account; or 

(b) has been quarantined in India on account of Novel Corona Virus (Covid-19) on or after 1st March, 2020 and has departed on an evacuation flight on or before 31st March, 2020 or has been unable to leave India on or before 31st March, 2020, his period of stay from the beginning of his quarantine to his date of departure or 31st March, 2020, as the case may be, shall not be taken into account; or 

(c) has departed on an evacuation flight on or before 31st March, 2020, his period of stay in India from 22nd March, 2020 to his date of departure shall not be taken into account. 

Read the full text of the Circular 11/2020 dated 08.05.2020 for determining the residential status of foreign citizen/NRIs stranded in India amid COVID-19



Circular 11 of 2020

F. No. 370142/18/2020-TPL 
Government of India 
Ministry of Finance
Department of Revenue 
Central Board of Direct Taxes 
****


New Delhi, May 8, 2020 


Clarification in respect of residency under section 6 of the Income-tax Act, 1961  


Section 6 of the Income-tax Act, 1961 (the Act) contains provisions relating to determination of 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 previous year or years preceding the previous year. 


2. Various representations have been received stating that there are 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 non-resident or not ordinary resident in India. However, due to declaration of the lockdown and suspension of international flights owing to outbreak of Novel Corona Virus (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. 


3. In order to avoid genuine hardship in such cases, the Board, in 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 and: 


(a) has been unable to leave India on or before 31st March, 2020, his period of stay in India from 22nd March, 2020 to 31st March, 2020 shall not be taken into account; or 


(b) has been quarantined in India on account of Novel Corona Virus (Covid-19) on or after 1st March, 2020 and has departed on an evacuation flight on or before 31St March, 2020 or has been unable to leave India on or before 31st March, 2020, his period of stay from the beginning of his quarantine to his date of departure or 31st March, 2020, as the case may be, shall not be taken into account; or 


(c) has departed on an evacuation flight on or before 31st March, 2020, his period of stay in India from 22nd March, 2020 to his date of departure shall not be taken into account. 


(Neha Sahay) 

Under Secretary (TPL)-I


Download Copy of Circular No. 11/2020 dated 08.05.2020 in pdf format.

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