FM announces Relief for Stranded Non-Resident Indians and Foreign Nationals for NRI tax rules due to COVID Lockdown. On Friday, Indian Finance Ministry allowed discounting of prolonged stay period in India to determine residency status amid the lockdown. In a much anticipated and awaited relief for Non-Resident Indians and foreign visitors to the country, FM Nirmala Sitharaman on Friday allowed discounting of prolonged stay period in India to determine residential status amid the lockdown and prohibition of international travel. Due to the COVID-19 pandemic and the lockdown, people have been forced to prolong their stay in India. The situation has modified the status of their residency, having a direct impact on their taxability in India, under provisions of the Indian Income Tax Act Laws. This has cleared some air around NRI taxation and NRI tax rules.
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 shedding light on NRI tax rules.
“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 to determine residency status.”
The Finance Ministry further stated that as the lockdown continues during the financial year 2020-21, 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 normalization of global flight operations, for determination of the residential status for the financial year 2020-21 will 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. Thus the NRI services in India have elucidated the NRI tax rules in this COVID situation.
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 as per the Ministry. 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.
CA Ajay R. Vaswani is a Fellow Member of the Institute of Chartered Accountants of India. He qualified in the year 2012 and since then servicing international clients for taxation and other related activities in various countries. He is also Qualified Company Secretary, Bachelor of Commerce along with holding Diploma in Information System Audit and Bank Concurrent Audit by The Institute of Chartered Accountants of India. He has in depth study of Various Laws applicable to Non Resident Indians and has delivered in more than 300 lectures attended by over 4,000+ audiences.