Covid-19: India relaxes tax residency criteria for NRIs, foreign visitors

Tax

Extended stay in India due to lockdown would not be counted to determine residential status.

Stranded Indian Americans, other NRIs and foreign visitors worried about having to pay taxes in India because of their extended stay due to lockdown and suspension of international flights can relax.

The Indian Finance Ministry announced on Friday decided not to include extended stay of foreign visitors and NRIs in India due to lockdown in determining their residential status.

This follows representations received from people concerned about having to file tax returns as Indian residents with their prolonged stay in India changing their residency status under the Indian Income Tax Act.

In view of this Indian Finance Minister Nirmala Sitharaman has allowed discounting of prolonged stay period in India for the purpose of determining residency status, an official release said,

The Finance Ministry said a circular excluding the period of stay of these individuals up to the date of normalization of international flight operations, for determination of the residential status for the financial year 2020-21 would be issued after the flights are resumed.

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For the financial year 2019-20 ended on March 31, the Central Board of Direct Taxes (CBDT) issued a circular making it clear that any period of stay in India post March 22 to March 31 will not be included for calculation of number of days required to determine residency status for tax purpose.

Also, 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, his period of stay in India from March 22 to his date of departure shall not be taken into account, the circular 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.

A taxpayer is considered a resident of India if his stay in India for a year is 182 days or more or his stay in India for the immediately four preceding years is 365 days or more and 60 days or more in the relevant financial year.

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