Taking in consideration the present scenario that’s been created due to the nationwide lockdown imposed on 25.03.2020, the Central Government released a circular dated 08.05.2020 regarding the residency of individuals who had travelled to India for a specific period of time but were forced to stay down in the country due to the lockdown.
Section 6 of the Income Tax Act, 1961 (hereinafter referred to as “Act”) contains provisions relating to determination of residency of a person. The status of an individual, as to 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 previous year or years preceding the previous year. Indians living abroad are not treated as residents for tax purposes by the Income Tax Department provided they spend less than 120 days in India.
As per the circular released, certain relaxations have been provided to people 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 year for maintaining their status as non resident or not ordinary resident in India, but had to extend their stay as a result of the lockdown imposed across the nation on 25.04.2020 and the cancellation of all international flights.
As per the powers conferred upon the Centre under Section 119 of the Income Tax Act, 1961, the following clarifications have been made to determine the residential status under Section 6 of the Act during the previous year 2019-20 in respect of individuals who has come to India on a visit before 22nd March, 2020-
- People who were unable to leave the country on or before 31.03.2020, their period of stay in India from 22.03.2020 to 31.03.2020 shall not be taken into account.
- People who have been quarantined in the country on account of Covid-19 on or after 01.03.2020 and departed on an evacuation flight on or before 31.03.2020 or were unable to leave India on or before 31.03.2020, their period of stay from the beginning of quarantine till the date of departure or 31.03.2020 as the case may be, shall not be taken into account.
- People who departed on an evacuation flight on or before 31.03.2020, their period of stay in India from 22.03.2020 to their date of departure shall not be taken into account.
The Finance Ministry said that since it was not clear when the NRIs would be able to fly out, the Central Board of Direct Taxes had issued orders that this extended stay in India would not be counted to determine their residential status for the financial year 2020-21. The exact dates which shall be excluded shall be issued after international flights resume.