Finance Ministry Announced Relief for NRIs and Foreign Visitors on Residency Status

The Finance Ministry announced relief to those who have been facing difficulty with the status of their residency in India under the provisions of the Income Tax Act, due to lockdown and suspension of international flights.

Owing to outbreak of coronavirus (Covid-19), several NRIs and foreign visitors have been forced to prolong their stay in India. This has changed the status of their residency having implications on their taxability in India.

The Finance Ministry has now decided not to include extended stay of foreign visitors and NRIs in India due to lockdown in determining their residential status.

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 for the purpose of determining residency status, a government statement said.

The Finance Ministry further stated that as the lockdown continues during the financial year 2020-21 and 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 normalisation of international flight operations, for determination of the residential status for the financial year 2020-21 shall be issued after the flights are resumed.

The Central Board of Direct Taxes (CBDT) 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 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, 2020, his period of stay in India from March 22 to his date of departure shall not be taken into account.

It may be noted that there are number of individuals who had come on a visit to India during the previous year 2019-20 for a particular duration and intended to leave India before the end of the previous financial year for maintaining their status as non-resident or not ordinary resident in India.

The status of an individual whether he is resident in India or a non-resident or not ordinarily resident, is dependent, inter-alia, on the period for which the person is in India during a year.