In a big relief for NRIs and foreign visitors, the Finance Ministry on Friday allowed discounting of prolonged stay period in India for the purpose of determining residency status amid the lockdown and prohibition of international travel. Due to COVID-19 and the lockdown, such people have been forced to prolong their stay in India. This has changed the status of their residency having implications on their taxability in India, under certain provisions of the Income Tax Act.
The Finance Ministry has now decided not to include an extended stay of foreign visitors and NRIs in India due to lockdown in determining their residential status.
"Considering various representations received from people who had to prolong their stay in India due to lockdown and suspension of international flights, expressing concerns that they will be required to file tax returns as Indian residents, Finance Minister Nirmala Sitharaman on Friday allowed discounting of prolonged stay period in India for the purpose of determining residency status," a statement from the Ministry said.
The Finance Ministry further stated that as the lockdown continues during the financial year 2020-21 and it is not yet clear as to when international flight operations would resume, a circular excluding the period of stay of these individuals up to the date of normalisation of international flight operations, for determination of the residential status for the financial year 2020-21 shall be issued after the flights are resumed.
The Central Board of Direct Taxes (CBDT) has issued a necessary circular to this effect. The circular makes it clear that any period of stay in India post-March 22 to March 31 will not be included for calculation of the number of days required to determine residency status for tax purposes. Visitors who had to be quarantined for a period even before March 22 will also get relief.
Even if an individual has departed on an evacuation flight on or before March 31, 2020, his period of stay in India from March 22 to his date of departure shall not be taken into account, the Ministry said. The status of an individual whether he is resident in India or a non-resident or not ordinarily resident is dependent on the period for which the person is in India during a year.
(With inputs from agencies) (PTI Photo)