NRI Residential Status for the Financial Year 2020

NRI Residential status for the Financial Year 2020 – Covid-19

NRI Residential Status for the Financial Year 2020 – Covid-19

As we are aware, under income tax, the taxability of the income of any person depends upon his residential status during the relevant Financial Year. The residential status of the person thus plays a crucial role in determining the scope of taxable income and tax payable in India during the Financial Year. The present article contains recent clarification issued by the Government of India in respect of the residential status of NRI on account of sudden lockdown and suspension of international flights due to the Novel Corona Virus (i.e., COVID-19).

Clarification on the Residential status of NRI for the Financial Year 2019-2020

Provisions relating to the determination of the residential status are contained under section 6 of the Income Tax Act. As per section 6, an individual shall be said to be resident in India if:

  • The individual is in India in the previous year for 182 days or more; or
  • The person is in India for 60 days or more than 60 days during the previous year and 365 days or more during the preceding four previous years.

Additionally, an Individual shall be said to be ‘resident and ordinarily resident in India’ if:

  • The individual is a resident in India for at least 2 out of 10 immediately preceding previous years; and
  • The person is in India for 730 days or more during the preceding seven previous years.

Noticeably, there are various individuals, who are either non-resident or are resident but not ordinarily resident in India, who had come to India during the Financial Year 2019-2020 intending to leave India before the end of the Financial Year 2019-2020.

However, due to the COVID-19 outbreak and the subsequent declaration of lockdown and further suspension of international flights, such individuals were required to extend their stay in India. Such extended stay in India can result in an accidental change of their residential status from non-resident to a resident in India.

Notification

In order to avoid such unintentional change of residential status, the Central Board of Direct Taxes vide circular no. 11/2020 dated 8th May 2020, clarified following points:

SituationA period which shall not be taken into account
The individual who came to India on a visit before 22nd March 2020 and are not able to leave India on or before 31st March 2020Stay in India from 22nd March 2020 to 31st March 2020

The individual who came to India on a visit before 22nd March 2020 and has been quarantined in India on or after 1st March 2020 and-

·         Such an individual is departed on an evacuation flight on or before 31st March 2020; or

·         Such an individual is not able to leave India on or before 31st March 2020.

Stay in India from the beginning of quarantine till the date of departure of the individual or 31st March 2020.
The individual who came to India on a visit before 22nd March 2020 and has been departed on an evacuation flight on or before 31st March 2020.Stay in India from 22nd March 2020 till the date of departure of the Individual.

 

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Peter is a Senior Content Writer and Copy Editor in Finance specializing in GST and Import & Export. He has also written articles on Medical, Philosophy, and Literature and published research papers in international journals.