Form NR to provide relief from double taxation to Non-residents

Introduction of Form NR entailing details for Non residents to sustain their residential status to prevent unnecessary or double taxation vide CBDT Circular No. 2 of 2021 Dated 3rd March, 2021.

A very welcome and long awaited step taken by CBDT for the year 2020-21 by introducing this self declaration form to be submitted electronically at the web portal :

https:/nicforms.mp.nic.in/nicforms_designer/nic_form_selector.php?form_id=enRhYmxlNjAzZWY2NmIzZGI3NjIwMjEwMzAzMTg=

1. For the Year 2019-20:

The Govt had proactively given the relaxation vide Circular 11 dated 08^th May 2020 for non residents who were not able to leave India or were under quarantine before 31^st March 2020 or period of stay ignored in case they had been evacuated thru flights.

2. For the Year 2020-21:

The persons stranded in India due to Covid 19 pandemic may become resident in India if the PIO or Indian citizen

has total income that does not exceed 15 Lacs INR and he stays for more than 182 days or more

OR

if the total Indian income exceeds 15 Lacs INR and he stays for 182 days or more OR for 120 days or more and also 365 days or more in preceeding four years.

For Foreign Citizen-

if he stays for 182 days or more

OR

If he stays for 60 days or more and 365 days or more in preceding four years.

3. Dual Non Residency Cases :

A person may become resident in India in some cases even if he stays for less than 182 days in India. In that situation, there may be a case of dual residency. However, due to applicability of Double Taxation Avoidance Agreement (DTAA), such person will become resident of only one country as per the “tiebreaker rule” in the DTAA.

4. Credit for the taxes paid in other country:

A resident person in India shall be entitled to claim credit of the taxes paid in any other country.

5. International Experience:

It can be seen that OECD as well as most of the countries have clarified that in view of the provisions of the domestic income tax law read with the DTAAs, there does not appear a possibility of the double taxation of the income for PY 2020-21. As explained above, the possibility of double taxation does not exist as per the provisions of the Income-tax Act, 1961 read with the DTAAs.

6. Relief Provided In Case of Double Taxation:

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 this circular by 31st March, 2021.

7. Timeline for filing Form NR:

In order to understand the possible situations in which a particular taxpayer is facing double taxation due to the forced stay in India, it would be in the fitness of things to obtain relevant information from such individuals. After understanding the possible situations of double taxation, the Board shall examine that, – (i) whether any relaxation is required to be provided in this matter; and (ii) if required, then whether general relaxation can be provided for a class of individuals or specific relaxation is required to be provided in individual cases. 31^st March 2021 is the cut off date to furnish the requisite information in the Form NR.

8. Specific Details to be furnished:

Whether the taxpayer would be affected and would be resident in India and any other country, due to such stay during 2020-21 and whether any income is subjected to double taxation In India and in any other country. Nature of such income and quantum of such income to be disclosed in the Form NR.