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Relaxation of residency conditions for individuals stranded in India

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Relaxation of residency conditions for individuals stranded in India

In a circular, the CBDT said that if any individual is facing double taxation even after taking into account the relief provided by the relevant Double Taxation Avoidance Agreement (DTAA), he/she may furnish the specified information electronically by 31st March, 2021, to the Principal Chief Commissioner of Income-tax (International Taxation).

 

Residential Status for Previous year 2020-21.

The Board has received various representations requesting for relaxation in determination of

Residential status for previous year 2020-21 from individuals who had come on a visit to India

During the previous year 2019-20 and intended to leave India but could not do so due to suspension

of international flights. The matter has been examined by the Board and following facts have

Emerged: –

 

  1. Short stay will not result in Indian residency

There may be a situation where a person, who was a non-resident during the previous year

2019-20, gets stranded in India by reason of the COVID19 pandemic for some time during

the previous year 2020-21.

 

In such situations, there are less chances that the person would acquire residence status in India during the PY 2020-21 only for this reason as explained below:

 

(A).A citizen of India or a person of Indian origin may become resident in India only in one of the following situations: –

 

 (i)  if his total income from Indian sources (i.e., other than the income from foreign sources) does not exceed 15 lakh rupees in PY 2020-21 and he stays in India for 182 days or more during the PY2020-21;   

                                      or

 

(ii) if his total income from Indian sources (i.e., other than the income from foreign   sources) exceed 15 lakh rupees in PY 2020-21 and

 

                       (a) He stays during PY 2020-21 for 182 days or more

 

                     (b) He stays during the PY 2020-21 for 120 Days or more and also stays for 365 days or more in preceding 4 previous years.

 

(B). An Individual who is not citizen of India or a person of Indian origin may become resident in India only in one of the following situations: –

 

(i) if he stays during PY 2020-21 for 182 days or more; or

 

(ii) if he stays during the PY 2020-21 for 60 days or more and also stays for 365 days or more in preceding 4 previous years.

 

Thus, generally, a person will become resident in India for the PY 2020-21 only if he stayed in India for 182 days or more unless he is covered by the exceptions discussed above.

 

 

  1. Tie breaker rule as per Double Taxation Avoidance Agreement (DTAA):

As discussed above, a person may become resident in India in some cases even if he stays for less than 182 days in India. In that situation, there may be a case of dual residency. However, due to applicability of Double Taxation Avoidance Agreement (DTAA), such person will become resident of only one country as per the “tiebrealcer rule”

Conclusion:-

Thus, it can be seen that OECD as well as most of the countries have clarified that in view of the

Provisions of the domestic income tax law read with the DTAAs, there does not appear a possibility of the double taxation of the income for PY 2020-21. As explained above, the possibility of double Taxation does not exist as per the provisions of the Income-tax Act, 1961 read with the DTAAs.

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