Many non-resident Indians (NRIs) came to India just as COVID-19 had started to spread and were stuck in India for a longer period. The main concern after the pandemic was regarding the treatment of their tax liabilities. However, the government has come up with various rules about the residential status of these people.
Benefits In Relaxation of a Residential Status of a Resident Individual:
Considering the COVID-19 pandemic and the resultant overstay of an individual who had come to India on a visit before 22nd March 2020, the Central Board of Direct Taxes (the Board) issued circular no II of 2020 under section 119 of the Act provides relaxation in the residential status of an individual.
1. Any person who 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 considered for the purpose of determination of his residential status; or
2. Any individuals who have been quarantined in India because of Novel Coronavirus (Covid-19) on or after 1st March 2020 and have departed on an evacuation flight before 31st March 2020 or have been unable to leave India from the beginning of their quarantine to their date of departure or 31st March 2020, his period of stay will not be considered for determination of his residential status.
3. Any individual who has departed on an evacuation flight before 31st March 2020, his period of stay in India from 22nd March 2020 to his date of departure shall not be considered for the purpose of determination of residential status.
Exception To The Above Rule:
- citizen of India or a person of Indian origin may become resident in India only in one of the following situations: –
- If his total income from Indian sources exceeds fifteen lakh rupees in PY 2020-21 and
i) His stay in India during PY 2020-21 is for 182 days or more: or
ii) His stay in India during the PY 2020-21 for 120. days or more and stays for 365 days or more in the preceding four previous years.
- An Individual who is not a citizen of India or a person of Indian origin may become resident in India only in one of the following situations:
1. If he stays during PY 2020-21 for 182 days or more: or
2. If he stays during the PY 2020-21 for 60 days or more and stays for 365 days or more in the preceding four previous years.
- A person can become a resident as per the Double Taxation Avoidance Agreement (DTAA):
The tie-breaker rule:
1. A person may become a resident in India in some cases even if he stays for less than 182 days in India, there may be a case of dual residency. However, due to the applicability of the Double Taxation Avoidance Agreement (DTAA), such a person will become a resident of only one country as per the “tiebreaker rule” in the DTAA.
2. If he has a habitual abode in both States and in neither of them, then he shall be deemed to be a resident of the State of which he has a nationality.
The author Sushant Gangurde is a legal analyst @Taxblock India who aims to educate people about various tax laws and financial planning.
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