Government’s decision comes as a relief to NRI’s amidst lockdown

In an alleviation to Non-Resident Indians (NRIs), the administration on Friday permitted keeping out the time of their constrained stay in the nation for deciding their tax residency status.

The government enforced a lockdown on March 24 and is yet to allow movement, including global flights. Different NRIs/Persons of Indian Origin who had made a trip to India before the beginning of the lockdown are unable to return and had communicated their concerns over their tax residency status.

While earlier a foreigner who visits India would be classified as an Indian resident if they live for 182 days or more in the previous year in the country. But from this financial year i.e. 2020-21, the threshold limit of stay has been cut down to 120 days. This indirectly indicates that some of the NRIs who got stranded in India could be considered as resident, which could result in in facing issues of dual tax residence and citizenship.

“Considering different problems from individuals who needed to extend their stay in India because of the lockdown and suspension of flights globally, Finance Minister Nirmala Sitharaman today (on Friday) permitted discounting of prolonged residence in India in an attempt to to determine residency status,” the Central Board of Direct Taxes (CBDT) stated in a press meet.

While the relief has been provided in the case of 2019-20, a follow-up circular is yet to be issued, which in turn relies on the resumption of international flight services.

The circular claimed an individual who visited India before March 22, 2020, and had been unable to leave India on or before March 31, 2020, his period of stay during that time will not be taken into account. Also, in situations where a person has been quarantined in India on account of Covid-19 on or after March 1 and has departed on an evacuation flight on or before March 31 will be exempted from tax residency.