In a major relief to Non-Resident Indians (NRI) and foreign nationals stuck in India due to lockdown, the Centre on Friday said that their stay in the country during the period will not be counted for the purpose of determining their residency status for taxation purpose.
As per the income tax rules, a person who stays in India for less than 120 days is considered as NRI and his income is not taxed in India.
There were apprehensions that the extended stay of the NRIs could lead to these individuals becoming Indian residents as per Section 6 of the Income Tax Act.
In a statement issued on Friday, the finance ministry said that considering representations received from people who had to prolong their stay in India due to lockdown, Finance Minister Nirmala Sitharaman had allowed discounting of prolonged stay period for the purpose of determining residency status.
In a circular, the Central Board of Direct Taxes (CBDT) said in order to avoid genuine hardship in such cases, for the purposes of determining the residential status for 2019-20 of an individual who has come to India on a visit before March 22, 2020, and has been unable to leave India on or before March 31, 2020, his period of stay in India from March 22 to March 31, 2020, shall not be taken into account.
Moreover, such individuals have been quarantined in India due to COVID-19 on or after March 1, 2020, and has departed on an evacuation flight on or before March 31, 2020, or has been unable to leave India on or before March 31, 2020, his period of stay from the beginning of his quarantine to his date of departure or March 31, 2020, as the case may be, shall not be taken into account for determining residency status.
If such individuals have departed on an evacuation flight on or before March 31, 2020, his period of stay in India from March 22, 2020, to his date of departure shall not be taken into account.