These stranded NRIs had been given relaxation in residency criteria for income tax purposes for FY 2019-20. NRIs were seeking relaxation because the rules for determining the residency for an NRI have changed from FY 2020-21.
Abhishek Soni, CEO & founder, Tax2win.in says, “NRI taxpayers were hoping the similar relaxation (as was given in FY 2019-20) from the Budget 2021 as well, i.e., it was expected that stay in India till the date when international flights were resumed will be excluded for the purpose of determining the residential status as per the law of Income Tax in India. However, there is no benefit announced in the Budget in this regard.”
Shalini Jain, Tax Partner – People Advisory Services, EY India says, “In order to keep a tax neutral Budget on account of the Covid 19 pandemic, the FM has neither added any new tax levy nor given any relief to the individual tax payer. Also, the FM has not provided any relief to stranded individuals on account of tax residency determination, which may eventually lead to a higher taxation of these individuals due to reasons beyond their control”
Dr Suresh Surana, Founder, RSM India says, “Due to the lockdowns imposed during the current financial year 2020-21 (including the national lockdown from April 1, 2020 to May 17, 2020) and the resultant travel restrictions, several non-residents were stuck in India. It was expected that there would be clarification or amendment for the exclusion of such stay in India for the determination of the residential status. Earlier CBDT had announced similar relief for FY 2019-20 and it was mentioned that for FY 2020-21, the relief would be separately announced. It appears that non-residents will have to wait for some more time. It was expected that the number of 120 days would be relaxed to 182 days in this Budget so as to not to disincentivise NRIs from investing in India. However, the same has not been considered in Budget 2021.”
Effective from April 1, 2020, if the total income accrued in India for an NRI exceeds Rs 15 lakh, then in such a case he/she remains non-resident in India if stays in India is less than 120 days. On the other hand, if the total taxable income accrued in India does not exceed Rs 15 lakh, then he/she can remain non-resident for their stay up to less than 182 days in India.
If the stay in India exceeds the maximum limit mentioned above (depending on the income), then the individual will be classified either as a Resident and Ordinarily Resident (ROR) or Not Ordinarily Resident (NOR), as determined by additional residency conditions.
A relaxation was provided to individuals stranded in India due to coronavirus-related travel restrictions for FY 2019-20 via a circular dated May 8, 2020 by the Central Board of Direct Taxes (CBDT). As per the circular, for determining the residency status for an individual for FY 2019-20 in respect of an individual who came to India before March 22, 2020, and was unable to leave India on or before March 31, 2020, then in such cases, stay in India between March 22, 2020 and March 31, 2020, will not be considered for determining the residential status.
The circular further clarified that individuals quarantined in India due to Covid-19 on or after March 1, 2020 and departed from India through an evacuation flight by March 31, 2020 or was unable to leave India by March 31, 2020, then in such cases the stay in India from the start of quarantine to the date of departure or March 31, 2020, will not be taken into account for determining the residential status.
If an individual departed from India on an evacuation flight by March 31, 2020, then in such cases stay in India between March 22, 2020 and the date of departure will not be taken into account for determining residency criteria, the CBDT circular stated.